The Volatilian™ View

Take a Gulp – it’s the society stupid!

There shouldn’t be any shock that the Mayor of Davao City is now the President Elect of the Philippines. Anyone who has spent any time in the country – outside “imperial Manila” – knew that the Filipino people have been asking for years for just the things that Rodrigo Duterte as mayor delivered to his own citizens. Consequently, serious social issues – rampant crime and official corruption, drugs, horrendous traffic problems, lack of clean drinking water and safe sanitation, and constant power outages (see Some stark social facts) – forced economic considerations to the back burner.

Filipinos craved these things long before most had ever heard of Duterte. As history has shown, such dissatisfaction is the stuff of bloody revolutions. Here though, the people did the next best thing to seek a cleansing for their country: they hauled in someone who felt the same way about these issues as they did and who had a proven record of dealing with them. In 2015, once lawless Davao City became the 9th safest city in the world (crowd-sourced global database, Numbeo.com).

Sellers of the Philippines – the financial club that ramped the upside of the economy for most of President Benigno Aquino’s term – however, remained blinkered (whether consciously or inadvertently) to the real situation on the ground. The get-in, fill-your-boots mantra was universal. And certainly investors made money and some areas of the economy did benefit.

But there was scant regard for the tremendous daily difficulties which most Filipinos were enduring. Pundits who produced the world view that the Philippines had shed its ‘Sick Man of Asia’ image, did so via economic metrics, stats and meetings with the business-promoters of Makati. And through the narrow prism of the balance sheet, they got it right. A trip to any inner-city barangay, however, would have revealed a very different reading of the economy.

And so the ‘blue-sky’ mentality of the financial class ignored a wealth of hard economic fact that clearly showed Duterte would be the people’s choice and that a very different change was on the way. Filipinos were not enraptured by Aquino’s economic successes and the Philippine stock market’s stellar performance; they wanted their society fixing. And anyway, few outside the bankers and the brokers and the large corporations benefitted from those successes. The much-vaunted ‘trickle down’ simply didn’t happen. One in five Filipinos still live on less that US$1.25 a day.

gulpPolling in the Philippines, as elsewhere in the world, is a far from exact science. But in the run-up to the election, many analysts put great store by them – particularly the ones that had ‘Anyone But Duterte’ leading. The problem is that Social Weather Station and Pulse Asia, the most quoted pollsters, take samples of just a few hundred respondents from a handful of cities/regions.

Had analysts wandered into a 7Eleven store – anywhere in the country, at any time during the campaign period – they would have been able to get a reading from hundreds of thousands of potential voters from right across the nation. Courtesy of the Gulp Poll, they would have seen on a leader board above the checkout, the vote tally both nationwide and for each shop’s locality, for each of the candidates.

And for weeks before the country officially went to the polls, Gulp voters consistently had Duterte as their No.1 choice for president. But even if they had just taken an anecdotal sampling of ‘ordinary people’ – the ones who commute by jeepney or trike, in short, the majority – they would have had a more-rounded view of what the Philippines electorate was calling for.

This should serve as a cautionary tale for anyone advising the investment community. Good investment advice is not simply down to figures and charts, many of which can, and regularly are, finessed to gild the lily or to promote some personal political ideal (yes, that really happens). Society (the people), cultures and their practices, politics and its players can make a mockery of any projections if they are not taken into account.

SOME START FACTS

Crime. “… a significant concern,” (Philippine National Police Directorate for Investigation and Detective Management). Murder, physical assault (especially rape) – index crimes – and robbery top the list. Carjacking, cybersex dens, pick-pocketing, confidence schemes, acquaintance scams, blackmail and credit-card fraud are close behind and growing. A PNP study showed that in 2010-15 the three worst centres for index crime were: Quezon City with an annual average of 13,102 murders and physical assaults; the City of Manila, 10,938 and Cebu City 7,760.

Official corruption. Graft costs the Philippines economy hundreds of millions of US dollars annually. Key areas include kickbacks for contracts issued by government departments, central and provincial (e.g., construction and services), government patronage, salaries inflation, and Customs Department scams, including smuggling rackets in which Customs staff are complicit.

Drugs. In 2012, the Philippines had the highest rate of shabu (a cheap methamphetamine) use in East Asia (UN World Drug Report). Little has been done since to improve that ranking. Last year, 92% of Metro Manila barangays and more than 20% nationwide had some degree of drug problem (Philippine Drug Enforcement Agency).

Traffic. A 2015 study (The Waze Global Driver Satisfaction Index) showed that Metro Manila has the “worst traffic on Earth”. 50 million Waze users in 32 countries and 167 cities took part in the study. But every city and major town in the Philippines is snarled-up with traffic around the clock.

Water.  8.4 million Filipinos have no access to clean drinking water; 2.3 million drink untreated surface water from rivers, dams and canals; 6.1 million rely on “unimproved drinking-water sources” such as dug wells, rain collection and unprotected springs, (UNICEF/WHO report: Progress on Sanitation and Drinking Water: 2015 Update and MDG Assessment). It’s estimated that water-related diseases cost Filipinos some PHP2.8 billion annually in health costs and lost earnings.

Sanitation. Around 55 Filipinos die each day because 90% of sewage countrywide is not collected or treated properly. Just 10% of homes are linked to piped-sewage systems; 30% of the country doesn’t have access to improved sanitation facilities. (National Sewerage and Septage Management Program).