Investment News Analysis

More economy endorsements

Carlos Dominguez at the Asian Development Bank Governors Summit
Carlos Dominguez at the Asian Development Bank Governors Summit

“We are building an economy that is much kinder to its people”. That was the message from Philippine Finance Secretary, Carlos Dominguez III, delivered on Sunday at the end of the Asian Development Bank (ADB) Board of Governors Meeting – its 50th – held in the Japanese port city of Yokohama. Next year’s gathering will be hosted by the Philippines and held in Manila – home of the ADB’s headquarters (photo) – and Dominguez will be in the chair.

In a short speech the Finance Secretary outlined the theme for the 2018 meeting – “Linking People’s Economies for Inclusive Development” – while emphasising that inclusive growth is a priority of President Rodrigo Duterte’s administration and is enshrined in the socio-economic agenda being pursued by it.

Disparities of the past – “unevenness” of development; where some regions prospered and others were left behind – he added were being addressed and tackled “head on”. He said his government’s aim is to reduce poverty – which has dogged the Philippines for decades – and achieve upper-middle-income status for the country by the end of Duterte’s presidential term in 2022.

Dominguez explained that the bold comprehensive tax-reform packages, now being pressed by the government (though as usual gathering dust in Congress), along with Duterte’s “Golden Age of Infrastructure” plan – a PHP8 trillion investment programme, aimed at improving logistics and connectivity right across the country – and increased foreign direct investment to all sectors of the economy, not least agriculture, will provide the main drivers for the Philippines’ inclusive future.

But Dominguez wasn’t the only person in Yokohama explaining the health of the Philippine economy. It received glowing testimonials from two other attendees – the Philippine’s wealthiest woman and the head of Japan’s biggest car dealer in the archipelago. Both gave ringing endorsements for the government’s economic programme and for investing in the Philippines.

Teresita Sy-Coson, vice chairperson of SM Investments Corporation, one of the Philippines largest publicly listed trading conglomerates, supported the government’s economic roadmap saying her company is “optimistic because the growth of the economy appears highly sustainable with increasing momentum. We believe favorable conditions will exist for at least another decade”.

Ms Sy-Coson who is also chairperson of BDO Unibank – the largest bank in the Philippines in terms of total resources and assets under management – was confident about the country’s outlook: “There is more optimism as the growth of the Philippine economy continues, which gives us reason to further expand and grow our business,” she said. “Our group, SM, is upbeat in our expansion in the Philippines … [and] looks forward to more growth in the years to come with this government.”

The daughter of SM founder, Henry Sy Snr, she also broached the adverse publicity which the Philippines has received this past year – largely aimed at Duterte’s War on Drugs. “I know it is difficult to understand our politics and our President Duterte, [but] in spite of criticism, our underlying economy has been conducive to business activities”.

Back in May last year, Ms Sy-Coson telephoned Duterte to congratulate him on his election victory. It’s believed that in that conversation they discussed the need to push reform measures and stamp out corruption.

Meanwhile, Satoru Suzuki, president of Toyota Motors Philippines – 64 dealerships nationwide and 40% of the local car market – said his company is “especially optimistic” about the president’s “golden age of infrastructure” plans. And so he should be, more roads generally means more cars.

Last year Toyota announced that it would invest US$70 million in its Philippine operation to built 230,000 Vios subcompact sedans under a government incentive programme aimed at boosting car output. This is part of a broader scheme to raise the country’s regional competitiveness. Suzuki said that “taking on the challenge [is] testimony of our confidence in doing business in the Philippines”. Furthermore, he added, it’s a show of support for the Duterte administration.

In 2014, Toyota, which has been in the Philippines since 1988, was threatening to pull out of the market completely and move elsewhere in Southeast Asia; possibly to Malaysia, Indonesia or Thailand.

The problem then was that the previous government and the auto industry had got bogged down in discussions, revisions and disagreements – two years worth of them – over a plan to turn this tiny sector into a competitive regional manufacturing hub. Today, Suzuki believes that given the government’s support, with the “dedicated and highly skilled” Filipino workforce, the Philippines is well positioned to built a significant car industry over the next few years.

ADB president Takehiko Nakao, who was at the Yokohama event, had a similar bullish message – “The Philippines is a very good place for investment today,” he said.

All in all, this analysis, from people on the ground, people who’ve staked their companies’ cash on the Philippines’ economic future, people, moreover, who understand how the country works – they’re there; they’re among it every day – makes for very refreshing reading and should help further build investor confidence. The positive picture they paint stands in stark contrast to the dystopian view we get from the Western press.

In all the negative publicity that’s been targeted at the Philippines in the past nearly 12 months, there has been little if any attempt to present a balance picture of what’s actually going on as far as the economy is concerned. What’s worse is that there’s been little attempt to even try and understand it – how it works, why often it doesn’t; the people’s aspirations and their dashed hopes.

The Board of Governors is the ADB’s highest policymaking body. And it’s big with 67 members representing 48 Asia-Pacific nations and 19 countries from outside the region. Manila’s bid to provide the Asian lender with a permanent home was hard won. Tough lobbying under former president Ferdinand Marcos allowed it to beat off challenges from Bangkok, Colombo, Kabul, Kuala Lumpur, Singapore, Teheran and Tokyo.

In short, this organisation carries a lot of clout not just regionally but internationally. And so when Takehiko Nakao says that the Philippines is a good place to invest, he means it. Trust us; the president of the ADB doesn’t make statements like that just for something to say. Sadly though, it will get scant coverage; simply because it goes against the mainstream media narrative that the Philippines is a complete basket case.

Back in 1965, Cornelio Balmaceda, then Chairman of the Consultative Committee for the establishment of ADB, said this: “…the Bank must not only know the hardships, problems, and dreams of these countries, but must also look at these hardships, problems, and dreams through the eyes of these countries”.

We fully support that sentiment which is sadly lacking in today’s coverage of this potentially vibrant economy. And that’s why the media keep getting it wrong. And why they will continue to.

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