Bullish

Last  March 6, President Aquino rang the ceremonial bell to start the day’s trading at the Philippine Stock Exchange. He was there, along with the big names in business, to bask in the good publicity from the stock market’s very upbeat mood. Just days before his visit, the PSE index, the barometer of how share prices behave, pierced the 5,000 mark—the highest ever on record.

But it will serve the Aquino administration well to put things in perspective. The stock market is a good gauge of investors’ perception of what will happen to the economy in the next 6-12 months. And it is just that—a perception that things will be better in 2012. What the government must do now is ensure that its policies, programs and projects will work seamlessly to turn the investors’ expectation into reality.

It may not be all that difficult. Believe it when the President’s economic managers say that “Aquinomics” is starting to work. Foreign exchange reserves are at an all-time high of $77.4 billion (which more than covers the total foreign debt of $62.4 billion as of September 2011); interest rates are at their lowest levels (the Bangko Sentral’s overnight borrowing and lending rates are at an all-time low of 4 percent and 6 percent); inflation remains benign (the February 2012 rate was 2.7 percent, the lowest since October 2009); and the exchange rate is stable at P42-43:$1.

What must be done so as not to disappoint the market? The answer may be gleaned from the discussions at a government-sponsored forum held on the same day that the President was at the PSE trading floor. Secretaries Cesar Purisima of finance, Proceso Alcala of agriculture, Florencio Abad of budget, Cayetano Paderanga of economic planning, and Rogelio Singson of public works and highways, together with Bangko Sentral Governor Amando Tetangco Jr., were there to highlight “the benefits from the governance reforms so far implemented by the Aquino administration” and discuss “a comprehensive direction to achieve inclusive economic growth over the medium term.”

It is the latter point that is very important now, and Abad puts it aptly when he says that the main target of the administration’s bid to fuel economic growth is the acceleration of the Private-Public Partnership (PPP) projects. While the flagship program performed dismally in 2011, it holds much promise this year, as the numbers presented at the forum show: 15 PPP projects worth P196.82 billion to be rolled out, ranging from the P453-million vaccine self-sufficiency project to the P59.2-billion extension of the LRT Line 1 from Baclaran to Bacoor in Cavite.

In between are equally capital-intensive projects, like the P25-billion new water supply source project; the P20.18-billion road project that will connect the NLEx and the SLEx to decongest traffic in Metro Manila; two expressways in Cavite and Laguna worth P19.69 billion; the construction of a world-class passenger terminal building at the Mactan International Airport for P10.15 billion; the P10.5-billion project for the construction of 9,300 classrooms; and the extension of the LRT Line 2 from Santolan in Pasig City to Masinag, Antipolo, at a cost of P11.9 billion.

And there are other growth areas that the government has promised to focus on this year—agribusiness, tourism and the BPO (call centers) sector.

Alcala takes pride in the reduction of rice imports to 860,000 metric tons in 2011, or a third of the 2.4 million metric tons in 2010. He says his agency’s budget of P61.73 billion for 2012 will be spent mainly to pursue its staples sufficiency program, including enough rice production by 2013. Trade Secretary Gregory Domingo adds that tourism and agriculture are the top priorities because these can provide jobs in the countryside but that the government will also continue to push for big sectors, including the booming BPO industry.

The BPO sector deserves special mention. The Philippines is the world’s call center capital, No. 1 in voice and in contention to be the top in non-voice (finance, accounting, health care, IT, creative, engineering). It generated about $11 billion in revenues in 2011 and full-time employees of 640,000. It is estimated to post 20-percent growth in revenues this year, with a potential to reach $25 billion in revenues and 1.3 million workers by 2016.

Paderanga provided the only caveat during the forum: While the government is optimistic that 2012 will be substantially better than 2011, it continues to closely monitor external developments that pose significant risk to the country’s growth.

If only the debt crisis in Europe will not worsen any further and oil prices stop climbing beyond $110 a barrel, stock market investors have many reasons to be bullish in 2012.