Saving the economy

IT is said that when the United States sneezes, the Philippines catches a cold. Well, the US (together with much of the developed world) is down with pneumonia but, thankfully, the Philippines is not in coma. Only in sniffles… so far. Why?

Insulated from shock. In his well crafted address before the Management Association of the Philippines (MAP) last week, business leader Manuel V. Pangilinan (MVP) explained that the “intrinsic structure of our economy provides us with a fair degree of protection from the external stresses” that have “turned the world on its head.”

He said that 84 percent of our gross domestic product (GDP) is accounted for by domestic consumption and government expenditures. Our net exports constitute only 4 percent of GDP. Hence, the expected decline of our exports translates to a modest 2 percent of GDP. This simply means that the contraction of the world economy may strain some sectors (job losses, factory closures, etc.) but will not devastate us, like it does other countries.

Other factors that will help us survive the world crisis include the “positive, albeit slower, growth in OFW remittances” lower inflation rates reflected in reduced food and fuel prices? low interest rates? healthy and liquid banking system and a corporate sector that is not, on the whole, heavily leveraged? (and) improved macro-debt dynamics such as lower government debt to GDP ratio, a decrease in total external debt to GDP, and—because of the EVAT’a slightly higher tax revenue to GDP.”

Government’s role. Like other countries, our government is planning a menu of incentives to resuscitate the economy. This idea of throwing money to cure recessions via deficit spending was formulated long ago by John Maynard Keynes. However, MVP aptly advises that the success of the recipe “hinges on three critical ingredients: the size of the package; the quality of spending; and the credibility of the government and the confidence it inspires.”

Malacañang’s “economic resiliency plan” of P330 billion, equivalent to 5 percent of our GDP, appears miniscule compared with the aggregate US bailout of about $1.2 trillion, equivalent to 10 percent of their GDP. But already, some solons, like Senators Edgardo Angara and Aquilino Pimentel Jr., are asking where the money would be sourced.

Assuming the money can be properly sourced, the quality of how it is spent is as important as its size. For instance, the maintenance and repair of roads and bridges immediately creates jobs and stimulates other industries. Concentrating infrastructure expenditure in core growth areas will have maximum ripple effects.

In our politics-driven country, a huge fund in the hundreds of billions attracts a lot of pork barreling, corruption and raucous spending. “Corruption is a real concern,” warned former United Nations secretary general Kofi Annan.

The third point of MVP refers to the government’s capacity to execute the stimulus plan. I think that, considering her consistently negative trust rating, President Macapagal-Arroyo—more than ever—will need to show transparency and accountability to convince our people that this humongous stimulus package would not migrate to fatten private pockets, or to propel Charter change and other partisan agenda.

Private sector’s role. Noting that corporate greed, opaqueness and regulation failure were the main causes of the American crisis, MVP did not forget the private sector. Along with prudent regulation is the need for chief executives who would “focus on the long term rather than the next quarter.” From the Davos Forum in Switzerland, Jacob Frenkel, vice chair of beleaguered AIG, affirmed to BBC News that, indeed, lack of transparency and faulty regulations were the main culprits in the meltdown.

To the crème of Philippine business, MVP pleaded for more corporate social responsibility, stressing that the poor will be impoverished all the more by the downturn. Indeed, he knew whereof he spoke. He heads not only the nation’s most profitable company; he also chairs the country’s prime corporate philanthropist, the Philippine Business for Social Progress.

In the end, the most vital element to save the economy is participative and credible leadership. As MVP fittingly exhorted MAP, “it is ourselves who can best solve our problems because there is no greater empowerment than self-empowerment.” Similarly, philosopher Lao Tsu once said: “the poor leader is he who the people despise; the good leader is he who the people revere; the great leader is he who the people say ‘we did it ourselves.’”

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Outstanding jurist. On Feb. 13, the Supreme Court will honor Justice Adolfo S. Azcuna with a formal retirement ceremony. I will always remember him for writing one of the landmarks of my term as chief justice, Bayan vs Ermita (Apr. 25, 2006) that pulverized the calibrated preemptive response (CPR) policy.

His other noteworthy ponencias include Coconut Oil Refiners vs Torres (July 29, 2005) invalidating the grant of tax exemptions, via a mere executive order, in the Clark Special Economic Zone; Beltran vs Secretary of Health (Nov. 25, 2005) validating the phase-out of commercial blood banks; and Carlos Super Drug vs Dept. of Social Welfare (June 29, 2007) upholding the constitutionality of the 20-percent senior citizens’ discount.

Blessed with such wise decisions, Justice Azcuna will retire in sublimity and rectitude, confident of his exalted place in history.

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