Wednesday, February 21, 2007

Resolving the legitimacy issue is key to the success of Plan 789

IT is gratifying to see the government trying to rev up the economy so we could achieve a 7-9 percent growth in the country’s gross domestic product (GDP). It’s something worth noting because that means that finally, no less than the President herself has seen the futility of just cruising and muddling through a 5-6 percent growth that we have achieved in the last three years. Such level of growth has been quite decent compared to our performance a decade ago, but it has not been good enough to soak up joblessness in the country. Yes, there are growing opportunities for fresh graduates, especially those who have the skill and spunk to join the growing business process outsourcing industry. But the rate of job creation has been so slow to snatch the ordinary guys off the desperation of the streets. The rate of growth we have is not even enough to provide illusions to all those who want to be janitors in those gleaming towers housing the BPOs. Of course, the 5-6 percent is actually mediocre if we compare ourselves with immediate neighbors China, India, and Vietnam, who are having problems with the opposite—sizzling speed in the growth of their economies.

Thus, the raising of our ambition to achieve 7-9 percent growth in the next few years is a refreshing change. And it’s nice to hear the private sector is behind this idea. But can this really be achieved? We really hope so because it’s the only way we could really address joblessness and, ultimately, poverty.

Certainly, the external environment seems to be favorable enough. Despite all the talk about the cooling of the American economy and its worsening budget and trade deficit problems, the emerging economies (read China, India and the other dragons in East Asia) are expected to grow briskly at more than 7 percent. There is also talk about the possible slowing down in demand for electronics, but industry leaders here continue to expect robust sales due to the increasing use of microchips in cars, trucks, gadgets, and computers. The recent release of Microsoft Vista may even spur more demand for electronics. Barring any major economic and geopolitical shocks (like a sudden surge in global crude prices, conflagration in the Gulf or another terrorist attack at the scale of 911), the world economy may yet be relied upon to help us through that 7-8-9 ambition of ours.

We are happy to note that some domestic ingredients are actually present. Inflation is tapering off, the government’s finances are improving, interest rates are down, the dollar remittances are surging, the cyberservices sector is growing fast. Foreign direct investments numbers are improving quickly, an indication we are slowly regaining business confidence among foreign investors. And most of all, property analysts are saying that a construction boom is about to kick off as the country’s major business centers like Makati and Ortigas are running out of space for the burgeoning BPOs.

There are worrying trends, however. Despite the decent growth rates achieved so far, domestic investments are not rising, as indicated by the weak capital formation figures. Business people are not investing in durable equipment, nor are agribusiness entrepreneurs putting money in breeding stocks and orchard. Imports especially of capital goods are also not rising. Private construction in the last three years has also been flat. What this is saying is that local investors are not really putting a stake in the economy yet.

And why? One could only speculate, but we believe the attitude among business people is probably related to the continuing legitimacy issue of the Arroyo government. Investors are waiting if the coming election could resolve this legitimacy issue. Investors are “rational people”; they are not going to stake their money if they think the continuing question of legitimacy would linger. It’s no use expanding your factory and hiring more workers if you know this issue would distract Malacañang’s occupants into squandering public resources in politically-motivated and therefore economically wasteful expenditures that would ultimately hurt the economy. It’s no use putting money for the future, knowing that Malacañang dwellers are on purely survival mode and are distracted from governing.

The legitimacy issue, of course, could probably be addressed by a clean and honest election this coming May. At least, that’s what we are hoping for. What is of concern, though, is the notion that the ruling powers might not really be committed to such an exercise. Why? One reason is the continuing dream among top leaders of the Executive, and their allies in the House of Representatives, for charter change. According to political analyst Mario Taguiwalo, president of National Institute for Policy Studies, it’s obvious that a clean and honest election would only strengthen the Senate, which would thus resist any move to abolish it through Charter change. That means that cynically, they might just tarnish the image of the Senate by committing massive fraud, thus prompting an exasperated public to think that abolishing the Senate through cha-cha might just be the right thing. This is not to say that the ruling party is right now hatching this malevolent plot. But the strong temptation is there, especially that—based on the Pulse Asia survey—only a few candidates in the Team Unity are winnable. Some of the candidates may think that, should they go down, they might as well bring the house, nay the country, down.

That’s the worst “1-2-3 [double cross] scenario,” of course, and one hopes it won’t happen again, or we might as well kiss “7-8-9” goodbye. There’s so much at stake here, the least of which is the budding recovery achieved in the last three years. All well-meaning citizens should thus help see to it that we have such a clean and honest election for the sake of the country.

Crossing our fingers, what we would like to see—as enunciated well by Mr Taguiwalo at Wednesday’s Ateneo Eagle Watch briefing—is a mid-term electoral process that would plant the seeds for the election of a viable, credible and legitimate administration in 2010. That way, we could achieve stability and gain the political capital that the government could mobilize for the right economic and social reforms. The 7-8-9 dream seems a long shot, but who knows, given such a credible election providing leaven for genuine reform and boosting economic activity, it might be doable yet.

1 comment:

ilanit said...

Los Angeles private equity is clearly an industry in a hurry – on just about everything except in admitting its own failings.But their were encouraging signs of humility yesterday from the new “masters of the universe”, as committee chair John McFall dubbed private equity witnesses at the committee’s first session.