Foreign investors adopt wait-and-see attitude

The ongoing political controversy involving the Arroyo administration has sidetracked domestic and foreign investors into a wait-and-see attitude, stalling anew a relatively good start for the Philippine economy.

Standard Chartered Bank regional economist Mike Moran said while the Philippine economic fundamentals were impressive in the first quarter of the year, the recent political scandals related to last year’s national elections and the jueteng exposes involving the First Family have forced investors to adopt a cautious stance.

"The Philippines could miss the boat again," Moran said, referring to the recent investment surge in the region.

Moran explained that the weakening of the US dollar and the high probability of the Chinese yuan being revalued could result in improvements in other Asian economies with the exception of the Philippines.

But he said based on estimates for the first five months this year, the country’s economic fundamentals are moving toward recovery, buoyed by the passage of several revenue-generating tax measures.

The bank economist said that the fruits of the improved reform efforts were reflected in a stronger peso and narrower spreads in Philippine bonds, thus making debt servicing an easier task.

Fiscal consolidation year-on-year has been on track with roughly a 15-percent growth and government expenditures "fairly well-managed."

Moran admitted, though, that the international market is still concerned with the ability of the Arroyo administration to privatize the debt-ridden National Power Corp. (Napocor) which accounts for the biggest chunk in the country’s debt-servicing efforts.

Philippine Axa Life Insurance chief executive officer Victor Quisumbing echoed the same sentiment that investors have in fact started to switch into a wait-and-see mode "until the whole political uncertainty reverts back to normal mode."

He further decried that the gains produced in the past 12 months have been placed in an instant halt with threats of prolonged withholding of new investments until the end of the year, or after the final resolution of the political uncertainties.

"The key to strong growth in the financial sector is a good or stable economy," Quisumbing said, likewise indicating that the political aspect is negating all the positive gains.

For his part, Philam Asset Management Inc. (Pami) president Joey Ramos expressed dismay at the way the recent political uncertainties preempted the march of the equities market.

He said that the exceptional performance of the equities market in the past 12 months has been waylaid by the recent political stageshow.

"The investors are starting to take a wait-and-see attitude while others have started to look for investment opportunities elsewhere," the Pami chief executive said.