Down to earth views of Investment Upgrade
(Article Published in the June 06,2013 issue of Business Mirror)
Whereas the first two speakers at the round-table discussion I had organized last May 24 (Ms. Cora Guidote of the SM Group and Mr. Diwa Guinigundo of the Bangko Sentral ng Pilipinas) gave their aerial view of the implications for the investment upgrade the country had recently received from international rating agencies, the next three expressed their views with their feet on the ground.
Atty. Mike Aguinaldo, Deputy Executive Secretary for Legal at the Office of the President, outlined what the executive department was doing to turn the expected trickle down into an actual torrential downpour on those who need and will benefit the most.
The government is keen, says Aguinaldo, on hiking infrastructure spending to P698 billion (or 5% of gross domestic product) by 2016 from P249 billion (or only 2.6% of GDP) in 2012. NEDA reports that 61 projects, amounting to P425 billion, have been approved by the Investment Coordination Committee, 70% of which are infrastructure-related. This year alone, government spending on roads, bridges, and other public works will produce more than 60,000 jobs.
Tax collection understandbly is a major thrust. Since July 2010, 129 tax evasion cases have been filed, seeking to collect about P43,073 billion. In regular taxes, for the first quarter of this year, P244.1 billion was collected, exceeding by 6.56% last year’s. The regional offices had increased their collection by 20.01%; the Large Taxpayers Sector by 3.16%.
A big boost is the President’s Administrative Order No. 38 creating an inter-agency task force, called Ease of Doing Business Task Force, headed by the Secretary of Trade and Industry. Its mission is to review and develop policies, programs and guidelines that will ensure the implementation of Gameplan for Competitiveness designed by the National Competitive Council. This ensures a team approach to achieve the national goal of continued growth.
Atty. Gerard Mosquera, currently Deputy Ombudsman for Luzon, was a surprise speaker in two ways: first, a graft buster seemed to be out of place in an investment seminar; and second, not known to many, he was, as he revealed an OFW for six and a half years, most of them in East Timor. As such, he is actually what we want our OFWs to do: to come home and share with his people things that he learned abroad.
His major contribution was raising the curtain on an innovation, based on the global phenomenon that shows a strong correlation between a country’s level of corruption and state of wealth. To encourage the investor to risk his funds in the country, the Office of the Ombudsman is establishing the concept of an investors’ (complaints) desk.
The function of the Investors’ Desk is to ensure a level playing field by preventing corruption which really distorts the market. Corruption gives unwarranted advantage to those who are willing to pay under the table for favors and privileges denied others.
The unit is also expected to encourage investors by assuring them of predictability, i.e. the even application of policies and procedures, springing no surprises on investors at the oddest moments, particularly after the investor had already spent so much doing his due diligence and investigation of the milieu he intends to operate in.
Hopefully, by the time this piece goes to bed, the Investors’ Desk as proposed at the Office of the Ombudsman will be up and running.
Marvin Fausto of Banco De Oro was another speaker who went the extra-mile. In fact, several miles. He landed at Terminal 2 of the NAIA at around 3:30 pm from Hong Kong, went straight to the seminar venue and was right on time at the 34th Floor of Citibank Tower at 4:30. As a trust and investment manager for many years, his views on the impact to his clients were very instructive.
Taking his cue from studies that observed that a drastic change in the consumption behaviour occurs when the per capita income of a population hits $3,000 (we’re almost there), making people spend a bigger percentage of their incomes on consumer goods, it was clear to him that investors should (as the market indicates they are already doing) seriously consider putting their investible funds in food companies, car and similar manufacturer, mid-level to high cost condominium and other residential builders.
He is confident that the growth in these sectors is sustainable, given that the drivers of growth are based on sound fundamentals. This phenomenon he noted is confirmed by the experience of other countries, including our neighbours who got upgraded ahead of us.
Like his co-lecturers, he sounds the caveat that investment upgrade is not the panacea for all our problems. It simply rs means that the government and private sectors need to do more and need to be better. In the meantime, though, he believes that long term investors (e.g. those who would not need to pull their funds out in the next 10 years) are better off in the stock market. Bonds and fixed income instruments, in this period of very low interest rates, are not advisable. Without their knowing it, inflation may be actually causing them, even now, to lose money.