We scared away French investor - DEMAND AND SUPPLY

Well, our turbulent political environment made a French investor run away at the first opportunity. We are talking of Casino, a French retailer that was supposed to buy into the financially distressed Uniwide chain of stores. According to the regular daily report of Abacus Securities to its clients, an Abacus analyst was able to talk to Uniwide management "who confirmed the sudden sad turn of events that Casino has indeed pulled out."

According to Abacus analyst Nicky Franco, "the French retailer’s decision was apparently influenced by political factors. Saturday’s bombings were probably the deciding factor." That is really such a pity. Uniwide management told Abacus that everything seemed to be going smoothly until the sudden pullout was made.

"Management revealed that Casino personnel who were already detailed in the country did not know what was going to happen. In addition, UW’s systems were already linked to Casino’s and employees were already wearing Casino hats and uniforms," Abacus’ Nicky Franco reported. After Casino, it is doubtful if any other investor will have the appetite for investing here.

The Abacus advisory stresses "that Casino did not abandon plans to acquire Uniwide because of doubts regarding the troubled retailer’s prospects. Instead, we believe the French firm was forced to pull out because of the Philippines’ unstable political condition. Under any other environment, we believe that the buy-in would have been consummated."

Another French investor is also reportedly making noises about the failure of government to address the dramatic impact of the peso’s devaluation from P26 to over P50 to the dollar in its water concession. Without immediate relief, the concession is in danger of suffering a very serious cash crunch by month’s end. The concession is obligated to pay 90 percent of the foreign loans contracted by MWSS when government was running the service.

Numbers are now being crunched to see if it would make more sense for the French and its local partner to return the concession than run the risk of financial failure sooner than later. If this happens, that will be the first significant failure of a major privatization effort. Think of what that will do to further cloud the country’s investment climate.

What is really sad is that there seems to be no light at the end of our political tunnel. That’s why Casino bailed out and that’s why Suez Lyonnaise may be contemplating it. How many other foreign investors are now focusing on the exit door? It is a question of who turns belly up first, the economy or the Estrada administration.

Four day week

It is funny how Donald Dee of ECOP reacted to the warning of Raul Concepcion that there are companies now thinking of going on a four-day work week. Mr. Dee, who I understand wants to be named DTI secretary, called Mr. Concepcion an alarmist. In disputing Ronnie, Mr. Dee said it is not possible for local industries to be so drastically affected because half of them are export oriented.

Well, I have news for Mr. Dee, the brother of the once famous Dewey Dee. The Association of American purchasing managers has reported a dramatic decline in their index for the month. To some economists, that is a signal that the American economy is in real danger of a recession.

Translated, if the demand for goods and services from the American economy is indeed on the decline, who will buy those things produced by our export oriented companies? And if the demand for these products fell, of course employment will be affected as Ronnie Concepcion predicts.

I think Ronnie is doing a great public service by warning everyone that we have a problem in our hands. It is dangerous to propagate the myth that everything is fine and dandy as Mr. Dee is doing, when the reality is otherwise. As Ronnie puts it, it gives him no pleasure to be a messenger of bad news because a serious unemployment problem will have undesirable social impact that affects everybody.

But we must not be deluded into thinking that things are just fine when they are not. I understand why Mr. Dee must make "sipsip" but the line must be drawn when in the process, he ends up misleading the decision makers of this country. We simply must think of something to address that very real problem we are facing.

Thai advantage

Right now, Thailand is still in the same "PIT" with us and Indonesia. But from what I saw there last week, they won’t be there for long. For one thing, Thailand has good functioning infrastructure. For another, the investors who went there prior to the crisis, are still there and ready to expand.

Most important, it seems that the Thais are more serious about their laws than we are. The way their equivalent of our Ombudsman has acted to discipline public officials and cut corruption is admirable. They really seem to do it without fear or favor. Even one of the members of their anti corruption commission had to resign because the statement of assets and liabilities she filed was inaccurate.

This reminds me of a story about an investment mission we sent to Thailand in the waning years of the Marcos administration. They were taken around to see how investments are pouring in and so one of the Filipinos asked their hosts what is the secret of Thailand. The Thais reportedly replied, ever so diplomatically that all they did was get a copy of the Philippine Investment Incentives Act and adopted it as their own with slight modifications. But the real difference, the Thais said, was that they implemented it.

The Filipinos were then brought to see examples of Thai agriculture. Again, the Filipinos were impressed and asked the Thais for their secret. Once again, the Thais replied that they merely sent their best students to Los Baños to learn state-of-the-art technology and upon their return to Thailand, implemented what they learned. Isn’t that frustrating?

Even now, Thais tell us they used to look up to us. We were way ahead of them 30, or maybe even 25 years ago. They developed, we didn’t. There is something wrong there somehow and my guess is, it must be the quality of our leaders. Since we are a democracy and given the quality of our masa, how do we break the vicious cycle? By investing on the education of our masa, of course. Unless we are ready for a dictatorship again, which is no guarantee for development as the Marcos experience taught us.

Secret

From reader Benjie Angeles comes today’s Erap joke.

A man entered Malacañang Palace and shouted: "Tanga si Erap" three times. He was convicted and was sentenced for two months in jail for oral defamation and 20 years for revealing a government secret. (Boo Chanco’s e-mail address is [email protected])