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Economic indicators are best proof of business confidence in the Aquino administration


The best way to measure President Benigno S. Aquino III’s performance during his first year in office is to show proof of investors' confidence, which is manifested in the economic indicators in terms of trade and investment inflows, the number of new projects registered with the government, and the robustness of the stock market.

Investments registered with the Board of Investments (BOI) in the first half of 2011 increased by 20.27 percent to P204.175 billion over the same period last year, which the agency attributed to the bullish sentiments pervading in the country that "draw businessmen to pour money where their mouths are."

“Because everything is bullish,” BOI managing head Cristino L. Panlilio said. He noted that the government is undertaking a “double checking analysis” on the FDI (foreign direct investments) which he said would prove the bullish atmosphere going on in the country.

“Ninety percent of business people are investing and putting their money where their mouths are, and if you are part of the 10 percent who are doing analysis paralysis, you will be left behind,” Panlilio said.

Panlilio cited the booming construction sector, the ongoing expansions of multinational corporations such as Coca-Cola, Nestle, the robust business process outsourcing (BPO) sector and the growth of the microfinance firms.

“The commercial banks have grown, the past dues of banks have gone down to a historical low of 3 percent while the stock market is on an all-time high,” he pointed out.

“My advice to all serious investors is don’t get left behind by pondering too much on the negative, but look at the Philippines as half full, not half empty,” he added.

“Believe me, I am a businessman and I’m putting my money where my mouth is,” he said.

There were 148 projects approved by the BOI for the first semester of the year or 64 percent more than the year-ago level.

The number of jobs to be created once these committed projects go on full commercial operation also significantly increases by 128 percent to 31,899 versus 14,021 in 2010.

With the robust investment inflows, Panlilio said the BOI is now setting its eyes over revising upward its growth target this year.

"Hitting P302 billion investments this year is possible," Panlilio said.

Already, Trade and Industry Secretary Gregory L. Domingo has called for a re-computation of the country’s foreign direct investments (FDIs) on strong suspicion the current measure of FDIs failed to capture the entire inflows into the Philippines that only created a negative perception among foreign investors on the country’s competitiveness in attracting foreign investments.

Domingo said that based on initial consultations with the Bangko Sentral ng Pilipinas (BSP), which tracks the FDI inflows, and various industries have fueled his belief that the FDI report of the BSP may not actually represent the correct FDI picture.

“There maybe several things not being captured by the system because the BSP inflows only record the dollars poured in through the banking system... Based on my talks also with the various industries, they said that the $ 1.7 billion FDI level reported by the BSP last year was actually very low,” Domingo said.

Domingo believed that the country’s reported FDI figure failed to capture all of its three components – equity capital, intra company loans, and reinvestment of earnings.

He suspected that the BSP data did not capture the re-investments of earnings and capital investments for imported new machineries and equipment. He noted that FDI represents increased in working capital, fixed assets and capital expenditure.

“Right now, it is just cash. So, we feel the $ 1.7 billion FDI level last year and going forward do not accurately reflect the true picture,” he said.

Domingo has stressed the need to correct the system because the FDI report has a big impact on the perception of investors, who looked at FDIs as a crucial indicator of a country’s competitiveness as an investment destination.

“When investors look at our FDIs as just one-third of Vietnam’s, their perception is that we are attracting very low FDIs so they create a wrong impression and that affects our competitiveness perception in a very significant way,” he said.

Having a correct FDI computation, he said, should also be for the benefit of the government to be able to see the true picture of investment inflows into the country.

For his part, Panlilio explained that the BSP has a liquidity or cash management mindset when it tracks FDI inflows.

“BSP is looking at net cash flow, but us from a development economic point of view we look at gross inflows, what really entered and created economic activity. For us, net cash inflow is not a factor,” he said.

He noted that 20 percent of foreign inflows of overseas Filipino workers (OFWs) are spent on consumer durables and 50 percent of those buying new housing units are OFWs. "These investments create economic activities," he said.

Panlilio explained that FDI, which is also defined by one economist to represent cross border financial flows, does not mean that the money that flows in and goes out of the country did not create economic activity.

From the trade side, the DTI has aggressively pursued and taking advantages of its trade agreements with ASEAN, China, Japan, Korea, Australia, New Zealand, and recently, India.

The DTI has been conducting seminars and conferences under its Doing Business in Free Trade Areas (DBFTA), which is a program of the DTI in partnership with the private sector (Philippine Chamber of Commerce and Industry and PhilExport), Bureau of Customs, and the Tariff Commission that seeks to increase utilization of free trade agreements (FTAs) in the Philippines.

Close to 1,200 exporters benefited in the DBFTA sessions held from November to December last year. More than 40 DBFTA sessions are scheduled nationwide for 2011.

The most visible economic indicator though is the performance of the stock market.

“The bullish local stock market is a good indicator of how the domestic economy should be judged,” said Philippine Stock Exchange chairman Jose T. Pardo.

“The stock market is the barometer of economic confidence. There is nothing more to say because the stock market has spoken and risen beyond expectation,” Pardo said as various business organizations have been trying to grade the Aquino administration’s performance on its first year in office.
“The best way to grade the administration is to show proof and the stock market has shown proof,” he added.

Pardo said that their expectation is that the market will further grow this year, especially once the implementing rules and regulations of the REIT (Real Estate Investment Trust) gets implemented.

“There is enthusiasm and interest in the Philippines,” Pardo said, noting that he met with Goldman Sacks for the planned meeting with 20 fund managers.

The Philippine stock market is generally in a bull trend and it is hard to stop it from moving higher given the optimism among investors, an analyst said. Even if the Asian and the U.S. markets are mixed, there is nonetheless so much liquidity in the Philippine market. Foreign investors are also pushing the index higher, perhaps optimistic of the potential of the country moving forward.

The continued 7 percent growth of the Philippine economy in the past two quarters is largely keeping investor sentiment buoyant, along with other signs of economic recovery. (PNA)

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