The Nitty Gritty of our Investment Rating Upgrade
(Article Published in the May 30,2013 issue of Business Mirror)
When three international credit rating agencies early this year recognized the Philippines, finally, to be investment-worthy, they, in my view, simply did what school teachers have been doing semester-in, semester-out. They gave a two-pronged judgment.
First, they played catch-up, reflecting in their pronouncements what the market had already been saying lately with their pocketbooks about the Philippines: the country (to the surprise of many including the august officers of business and trade organizations) had been doing well, despite of.
Second, they protected their behinds, caveating here and there, “but the country has to do this and that to (using the “S” word) sustain its growth”. Like my teachers upon my graduation many many moons ago at Lakan Dula Elementary School, they said, “Did a good job, here. But, it’s harder at Torres High. Study harder.”
The Round Table Discussion I organized last week at my favourite hang-out, the Top of the Citi at the 34th Floor of Citibank Tower, on Paseo de Roxas, was geared towards seeking some expert views on both. My invited speakers did not disappoint.
Lead discussant was Ms. Cora Guidote who is presently with the SM Group. We first met when she was in charge of Investor Relations at the Bangko Sentral during the term of then Governor Paeng Buenaventura. She was a prize catch because she was there when the country was downgraded to junk status during the term of Gloria Macapagal Arroyo. She knew that it was to be on the wrong end of the baseball bat.
She says the Philippines is in a good place, backed by strong monetary and fiscal systems and improved fiscal position. Translation: The Bangko Sentral, the tax collectors, and the budget allocators have done well.
She also says we are lucky to be relatively insulated from the financial turmoil in Western countries on its strong build up of international reserves from OFW remittances and BPO revenues, while debt-to-GDP continues to decline. Translation: Our bagong bayanis abroad continue to be bayanis; We have beaten the Indians in their own game of absorbing outsourced business from the West; and, hey, we are producing more and borrowing less.
To rev things up, she thus suggests that the public sector intensify its enabling role, ie. Government should more vigorously kick sluggard asses. It should attract more direct investments (not stock market players who make money on one another’s bets) in new sectors to deepen (ie intensify the impact and broaden the beneficiaries of) economic growth.
And by far, for everyone to generate more suitable jobs for a young and IT-oriented population. This really requires a paradigm shift: from giving better brooms to street sweepers to enlarging digital memories, increasing the functions of the ubiquitous cell phones, androids, and touch pads. And, perhaps, I may add: do something about the beer drinking at 8:00 o’clock in the morning.
The other “G” of my round-table discussion is Guinigundo, as in the Diwa Guinigundo, Deputy Governor, Monetary Stability Sector of the Bangko Sentral. He went the extra mile in giving his insights on the subject, in between rushing from the BSP Headquarters on Roxas Boulevard, where he was also involved in attending to the lecture of former Governor Jaime Laya, and back again to preside over that event’s closing.
But a more balanced source of history and prognosis, from the point of view of an overseer of the economy, cannot be thought. He has had his eyes glued on the Philippine macro economy for most of his career as a banker, almost right after his marching, shouting, and fist-clenching in the streets of the University of the Philippines and wherever there were causes to be fought for.
And he gave a list of measures being employed in the Bangko Sentral toolbox. They are lightly stepping on the brakes to ensure that the economy does go only at manageable speeds. Without meaning to speak in an foreign language, these steps include the increase of more capital assigned to answer for non-deliverable fowards (esoteric deals that involve a play on exchange rates) as well as a cap (or limit) on the amount of exposure a bank may have in these transactions.
Guinigundo also mentioned that I had always the trust industry, that the happy days of the Special Deposit Accounts (no-brainer investment outlet for trust funds) are almost over. The SDAs are now off-limits to foreign funds. And real estate too, that sector that is blamed for the US mortgage crisis that afflicted the whole world that is suffering up to now, is being placed under close watch. Bank exposure to real estate loans are being monitored and real estate activities of those permitted, such as universal banks, are counted like one’s pulse rate.
We cannot be too careful is the message of the two Gs. And to that I, neither Greek nor Geek, could not agree more.
Other speakers, like Deputy Ombudsman Gerard Mosquera who spoke of an Investor’s Desk at the country’s kulit office, Deputy Executive Secretary Mike Aguinaldo on where the Executive is seeking to attract the flow, and Banco de Oro’s Marvin Fausto also gave their respective takes. More on their views in my subsequent pieces.