Investment News Analysis

Rating the rater’s rating

BMI Research, a unit of global ratings agency, New York-based Fitch Ratings Inc., has just downgraded its short-term political-risk assessment for the Philippines by 1.1 points. It now stands at 63.5. Its reasons for this, however, seem to be tenuous to say the least, leaving us to believe that this downgrade was inspired more by political interference than by solid risk analysis.

Here’s how BMI explained its ratings revision. “We believe that the arrest of Philippine Senator Leila De Lima on drug-related charges on Feb. 24 and the ouster of four other members from the senate on Feb. 27 are likely to raise the risk of political instability in the country”. The title of BMI’s update was: “More Political Infighting and Uncertainty to Come”.

We can think of a number of reasons why the Philippines could be targeted in a political-risk assessment – not least, the recent beheading on a German national by the Abu Sayyaf Islamist terror group; not least that the kidnap-for-ransom business by this group and others shows no sign of diminishing. Burgeoning piracy in the Sulu Sea brings with it other political risks, not least with neighbouring countries. Likewise, the resumption of hostilities by the communist New People’s Army following the collapse of peace talks.

But all that, apparently, is of no concern to BMI Research. It sees the loss of political clout by members of the Liberal Party as far more unnerving. BMI’s analyst evidently believes that a diminished Liberal presence in the Philippine Senate will “raise the risk of political instability in the country,” when in fact the opposite is the case.

The only sector of the population that’s concerned by De Lima’s arrest and the loss of Liberal chairs is the Liberal Party’s own supporters – a minority in the country. Immediately following last May’s election which ushered in Duterte, dozens of Liberal congressmen switched to his PDP-Laban Party. Did BMI Research have a risk problem with that? If it did, it never mentioned it.

The biggest threat to political stability in the Philippines right now according to this agency is that the Department of Justice issued an arrest warrant for someone it strongly believes is guilty of profiteering from the illegal-drugs trade. And yet, when Duterte named and shamed a raft of public officials – mayors, governors etc – who were to be called to account for their alleged transgressions in the illegal-narcotics business, there was no talk of a downgrade by BMI then.

They, however, weren’t members of the Liberal Party and that strongly suggests that this is yet more political interference from outside agencies. BMI should be applauding any country’s efforts to enforce the rule of law – to show that even a senator of De Lima’s stature can be called to account; that political status and Liberal Party membership don’t come with some form of immunity-from-prosecution plan; some get-out-of-jail-free card for political elites.

De Lima is now being held in a secure facility at Camp Crame, the Philippine National Police headquarters at Quezon City. Among the other inmates there are two other senators – one of them, Jinggoy Estrada. At the time of being charged he was the President Pro Tempore of the Senate; after the Senate President the highest-ranking official in the upper house.

There was no suggestion that their removal presented any political risk – but again they weren’t members of the Liberal Party. In fact, it was the Liberal Party administration that oversaw these senators fall from grace; it was Leila De Lima’s Justice Department that sent them to Camp Crame – in fact, De Lima personally went after these two senators like a pit-bull to remove them from the senate.

Not surprising then when asked yesterday about De Lima’s Camp Crame confinement and her claims of being a political prisoner, Estrada said this: “Serves her right … How can she become a political prisoner? Didn’t she harass us before? She did that every day for her own personal gain to enhance her political ambition”.

Was former president Gloria Macapagal-Arroyo whom De Lima jailed also a political prisoner? Is former Senate Minority leader and elder statesman, Juan Ponce Enrile, who was placed under house arrest during De Lima’s time in power as head of the judiciary, a political prisoner? No, like De Lima all these had been charged with crimes, and in the interests of upholding the rule of law she, like them, must be brought before a court to answer those charges.

All that background aside, the clear fact is that BMI has no inside knowledge as to De Lima’s guilt or innocence anymore than the rest of us do at this stage. The prudent thing to do would be to accept that this matter is now sub judice and have the sagacity to allow the law to take its course – as everyone seems to be doing in the case of De Lima’s driver/lover who was arrested in connection with the same alleged offences. There’s no outcry over his arrest, but then he’s not a member of the political elite so presumably that arrest doesn’t incur any political risk.

The fact is, if De Lima was indeed a beneficiary of drug money and she was afforded immunity from prosecution simply by virtue of her political rank – a former Justice Minister and now a member of the upper legislative chamber of the Philippine Congress – then the Philippines would be subject to serious political risk and would certainly warrant a downgrade.

Isn’t that precisely the problem with narco states like Colombia, certainly in the past, and present day Guinea-Bissau? Isn’t that the problem in places like Haiti, Eritrea and Turkmenistan where government officials are beyond the reach of the law; protected by their peers? The Philippines is supposed to be a representative democratic republic not some form of plutocracy where the politically connected have inalienable rights that set them apart from ordinary citizens.

Frankly, the biggest political risk to the Philippines right now comes from outside the Philippines; from the likes of Human Rights Watch, Amnesty International, Freedom House, and now BMI Research – all groups pursuing their own political agendas.

But what does this say for BMI’s appraisals of political risk; its impartiality; its scholarship? What other countries has it been singling out to further a personal mission rather than presenting an unbiased evaluation? How tainted is its research? How reliable is BMI as a ratings agency?

Let’s look at the second part of BMI’s claim, that “the ouster of four other members of the senate on Feb. 27,” which “are likely to raise the risk of political instability in the country”. How on Earth does their analysis reach that conclusion? More to the point, would it have reached that conclusion if four Duterte-supporting senators had been voted out of their committee chairs? ‘Ousted,’ of, course, is a well-chosen emotive word, but it reveals BMI’s true colours. As political saboteurs, BMI certainly lack subtlety.

But leaving that aside, does BMI really believe that a sclerotic legislature – which is what the Senate was becoming while Liberal Party members pursued political rather than legislative goals, using its chairs to baulk progress and hold up much-needed reforms in the process – is risk preferable to one that does the job for which it was elected? In fact, is BMI even aware of how much disruption was actually caused by those chairs held by the Liberal Party and its allies?

How thorough was this research? Was it simply based on headlines spewed out by the global anti-Duterte media? Or inspired by some rant by a Duterte critic which they’d caught part of on CNN or CNBC? Was it based on a wine-bar chat with a hack from the Duterte-critical The New York Times, whose offices are close by those of BMI Research in Manhattan’s fashionable west side? Who knows?

Unlikely though that they’d assessed the recent workings of the Senate; unlikely they set that against the government’s timetable for carrying out its socio-economic agenda – the main aim of which is to reduce the deplorable level of poverty in this country, and thereby eliminate another element of political risk.

BMI’s parting comment is that the developments concerning De Lima and the Senate chairs, “could be politically motivated, potentially leading to more political infighting and uncertainty over the coming quarters”.

What we’re fairly sure of is that it’s BMI’s downgrade that’s ‘politically motivated’ and that its effect could create a certain degree of uncertainty – thus making the assessment self-fulfilling.

We find BMI’s reasoning incongruous though. For example, when we look at it by the side of its recent appraisal of Thailand’s political risk. This is a country ruled by a military junta which has virtually removed all vestiges of democracy. There’s no parliament in the elective sense; the reins of power are held by the National Council for Peace and Order, a military authority which seized power in a 2014 coup d’état.

But not only does it sail the ship of state, it plays fast and loose with the judiciary; once independent, this institution is now a political tool used to quieten the Council’s critics. De Lima and Co should be grateful they’re operating in a democracy that allows what is often an abuse of freedom of speech.

But here’s how BMI gushed about Thailand earlier this month.  “…investors are buying into Thailand’s new political reality and increased prospects of political stability and economic reforms, which is in line with our view that the new constitution should ultimately be positive for economic growth over the coming years”.

For BMI’s information, that new constitution is Thailand’s 17th since 1932 – that’s a new constitution every 237 weeks. It’s had four in the last 10 years. Furthermore, the junta’s regularly promised elections have been pushed back yet again; this time until sometime next year – no date has been scheduled of course.

In the light of all this, we suggest that prospective investors in the Philippine economy simply ignore the plainly flawed BMI risk assessment and watch closely from here the work of the Senate in advancing the government’s socio-economic agenda that seeks to eliminate poverty and bolster the middle class.

Facebook Comments


  • There are many vested interests who arent happy with the imminent economic success of the Philippines,ergo this and other similar sideswipes to discourage potential investors! These notwithstanding i firmly believe now is the time for this country to shine.THIS COUNTRY WILL FLY!

  • Who told this BMI research group, the Philippine is now doing good in peace & order, housing for those neglected by the previous administration business are doing good, political propaganda of LP & yellow , CBCP, CHR group will not prosper coz they are not supported by the majority of the Pilipinos while the administration of President Duterte are being supported by the majority of the pilipinos also the ASEAN members as well as the super powers like Russia, Japan, China, US. There will be no uncertainty to come , the Philippines will continue to get the support of the majority of the pilipinos coz the President continuously cares for the poor

  • Sa dami ng project na nka liniya ng administration Duterte lahat ng pilipino ay makikinabang gaya na mga tulay na ginagawa sa ibat ibang dako ng pilipinas railways, mrt’s super hiways, into ay magagawa sapagkat ang perang pumapasok sa kaban ng bayan ay hindi kinukurakot , sapagkat ang Pangulong Duterte ay hindi MAGNANAKAW

    • Facts are more reliable than news. Inabutan n lng ng bagong admin. Ang ibang projects ng past admin. Ngaun lng naimplement. Hindi lahat ay credited k d30. Ngayon kung may mga bagong project n gagawin s knyang admin yon. At saka ano ba ang kalagayan ng bansa ngayon? S seguridad, kabuhayan, politikal, at ekonomiya? Ikumpara ntin noon bago umupo ang bagong admin. At saka tayo mgbigay ng opinyon.

  • Those who believe that the arrest of a High Rangking Illegal Drug personality may raise the risk of political instability are either Morons or involved in Illegal Drug Trafficking!

  • We don’t care about the downgrades…what is important to us is a peaceful n prosperous life for all law abiding Filipinos after cleansing the society of the mess and decay brought about by illegal drugs, surging of all forms of criminality, corruption in government, etc that is compounded by 3 decades of neglect that caused us to live dangerously throughout these years…the majority of us Filipinos are in full support to the present leadership of Pres. Duterte who has the sincerity and guts and dare to tackle these messy problems where previous leaders refuses to deal with…this is our chance to change and correct the wrongs that pervaded our national existence for so long and we cannot let go of it…

  • My dear pinoys who think that the arrest of delima and some members of the senate ousters is a sign of political instability..baliktad..the arrest and the ouster show that there is a strong political will of the new admin..if you notice those whose view is weak is again on delimas arrest and her cohorts dethronement..
    We dont care about paid ratings..kahit na 1000% ang rating kung bobo naman ang presidente..inggit lang sila sa popularity ng presidente..bakit kasi nakikialam ang america sa pinas..e d pack up and go..

  • Volatilian, who do I believe – you or BMI which for more than 30 years, its forecasts, data and analyses have been used by multinationals, governments and financial institutions to guide critical strategic, tactical and investment decisions worldwide. Holding offices in London, New York, Singapore, Hong Kong, Dubai, South Africa and Japan, its clients include a majority of Global Fortune 500 companies. On the other hand, which top worldwide organizations rely on your analysis – if we can call it that at all?

  • Not even in my narrow sight the realization of this BMI’s premonition. Anyway, China and Russia are definitely independent to this “self acclaimed agency”…

  • Who cares? BMI Research did not even issue warnings before the last Wall Street fiasco. Was it because it’s a part of the Establishment that keeps on protecting and promoting their selfish financial interests regardless of their victims? Most Filipinos believe that the country is in better hands these days and it would be enough to counter the vision of insecurities BMI Research is DREAMING of.

  • … did BMI send a representative here in rhe Philippines to see for themselves if our country is really a politicaly risky nation for investors.
    … did they interview some foreign expats assigned in the Philippines about their personal assessment of what’s on the minds of various business groups.
    … if BMI wants to know the real truth they should talk to people and not just rely on what the mainstream media is/are feeding them because it would be UNFAIR even to those who rely on their incompetent research machinery.

  • BMI Research biased evaluation was unfounded. It mainly based their research on headlines carried by giant local mainstream media whose main agenda is to keep feeding the public walloping packs of lies. Who cares about de Lima and the four senators unseated from their posts. LP represents only a minority in the senate. The most important thing is majority of the Filipinos believe that PRRD will set them free from hunger, criminality, illegal drugs, corruption and the likes.

  • The lazy rater’s way of rating a nation is maybe by relying on the news of the local mainstream media which was already demonizing the country’s current leader, and maybe made by the input of one rich lady who had a plan set to destabilise the country.