Calm on a stormy sea

The Forbes list of the world’s billionaires has three Filipinos in the top 300: Henry Sy, John Gokongwei Jr. and Enrique Razon Jr. That’s pretty impressive (I wonder how they can spend all that money).

It also has two people who wanted to join that list. Those two were already in the top 10—not of the richest, but of the most corrupt. The Philippines is the only country that has two: Ferdinand Marcos at No. 2 and Joseph Estrada at No. 10. Admittedly, it’s an old report—2004—but that doesn’t change the facts, does it?

And the Supreme Court says Estrada can hold public office. That must put the Philippines in another Top 10 list, if there were one, of countries with criminals as public servants. I’ve nothing against Estrada; he seems like a nice enough guy and is certainly well liked. But he was found guilty of theft and sentenced to a lifetime in jail. Gloria Arroyo saved him with a pardon from the penalty, not absolution of the crime. I said it in one of my recent columns: How can the Supreme Court rule in this way?

Let’s talk about finance at the more macro level—the country’s finances. They’re in good shape, but in part for the wrong reason. For instance, debt is well down, which is good. But it’s down because the government hasn’t been spending, and on such things as infrastructure, which is bad.

What is saving the situation is, as usual, the private sector, with the Public-Private Partnership (PPP) Center finally moving with some alacrity. It was hampered by the need to clean up questionable projects initiated under the previous administration, and to redesign or develop projects by a bureaucracy that just takes a long time to do anything.

But it’s moving now, and two projects are almost complete. Seven other PPP projects are either under construction or in the preconstruction stage. These include four that will help business, one that will help employees, and two for the betterment of society. There are 40 others in the pipeline.

The private sector also comes to the rescue through two modern sources: overseas Filipino workers and business process outsourcing. OFWs have grown from around three million in the early 1990s to an estimated 11 million today. They remitted $27 billion last year and total remittances have been growing 7 percent per annum over the past five years. BPO started in earnest a scant 12 years ago with call centers. It now employs an estimated one million young, well-paid Filipinos—from zero. Around 70 percent in call centers, but other segments (back-office processing, transcription, animation, engineering and digital content/game development) are rapidly making inroads. Total revenues last year were $18 billion—a figure not to be sniffed at.

They are a pressure valve for a system that can otherwise be in danger of collapse as the other revenue-generating activities grow too slowly. For instance, foreign direct investment (FDI), which appears to be doing really well based on a superficial glance at the numbers, is not when you dig a little. For one, it’s the lowest among the major Asian neighbors. For another, the $6.2 billion that did come in was not new investors keen to add Filipinos to their workforce. Over half (54 percent) of the $6.2 billion was intercompany borrowings, local MNCs borrowing from dad to rehabilitate, upgrade or expand.

Only 33 percent ($2 billion) was new equity investment, and only 10 percent of that, or $209 million, was in new manufacturing activities. A whopping 65 percent of that 33 percent was in finance and insurance services—supports to business, not business itself.

So net FDI was essentially for sustaining existing operations. The Philippines has still not aroused the world’s interest. The problem is it says it wants foreign investment, but does everything to discourage it with a system that is just too complex and convoluted.

Where the Philippines really stands out is in its financial stability. Many European countries would give their eyeteeth for the Philippine numbers. Just consider:

Gross international reserves at $80.8 billion, which can cover 10.6 months’ worth of imports of goods and payments of services. It’s also equivalent to 4.8 times the country’s short-term external debt based on original maturity. No risk of a default there. The world’s rating agencies have given the Philippines investment-grade ratings.

As for currency, the peso is stable, more influenced by American vagaries than anything the Philippines has done, or hasn’t. It hovered between P43.46 and P44.95 to the dollar last year. It is expected to stabilize at around P44:$1 this year and between P44 and P46 to the dollar in 2016.

Interest rates are also among the lowest the country has ever seen. An ordinary consumer can borrow for a house at 5.25 percent per annum from 8.7 percent four years ago.

Inflation reached 4.1 percent last year. This year it’s expected to fall into the 2.5-3.5-percent range.

It goes on, but you get the picture. This is a country in sound financial shape.

As I read the news around the world, I see one calamity after another. Russia and Greece are in danger of economic collapse. Syria and Iraq are under ruthless, people-killing rule. And many countries in the Middle East are with severe repression of free speech and the freedom to be.

We get so tied up in the trials and tribulations of this country that we tend to forget it’s far worse in far too many other places. But that doesn’t mean, as I can assure President Aquino, that all is going well here either. There is ever so much to do that he hasn’t done, but for now the country is stable, and apparently so into the future.

The Philippines is floating calmly on a stormy sea.