Man the post and stand your ground

These are interesting times. The country is experiencing rapid changes but it is also facing crossroads after crossroads. As far as its economic course is concerned, the Philippines appears to be on the right track. While we may disagree with the current administration’s political policies, we rest our case as far as its economic policies are concerned. The Arroyo administration’s best arguments against its critics are the country’s economic gains and the stability that it is now exhibiting. Consider the following:

• the government achieved a rare budget surplus in April this year, putting the January-April deficit to just P50 billion. This also puts the government on track to cut the deficit to P125 billion this year (or 2.1 percent of GDP from last year’s 2.8 percent)

• the balance of payments was at a $2.4 billion surplus in 2005 versus a deficit of $280 million in 2004 owing to surpluses in the current and capital accounts

• inflation eased to 7.1 percent in April this year from 7.6 percent in March and 8.5 percent a year earlier despite rising oil prices

• net foreign direct investments reached $1.1 billion last year, up 64.5 percent from 2004’s $669 million, and well above the projected $971 million. It is seen to hit $1.6 billion this year

• net foreign buying in the stock market was up 61.3 percent y-y in January-April this year to P19.5 billion

All these point to improving economic prospects and a more conducive environment for investments, notwithstanding the political noise as a backdrop.

Man of the hour

The country is now again at a crossroad as the implementation of the Mining Act, a major and crucial reform measure, hangs in the balance. The man of the hour is Environment Secretary Angelo Reyes who has to evaluate the findings of the Rapu Rapu Fact Finding Commission regarding the alleged mercury contamination down south and the culpability (if any) of the mining firm Lafayette Philippines. We say this is a test case and a major challenge to the Mining Act. All eyes are now therefore on Secretary Reyes who is in an unenviable position to come up with an objective decision on the issue that may very well be the basis of future disputes in the industry. Ultimately, his action on this particular issue lays down the direction for the whole industry and will convey to prospective investors how resolute the government is in pursuing this crucial reform.

Unfortunately, the situation has become very noisy with both camps flooding the papers everyday with arguments to push for their advocacies. In this light, we offer an unsolicited advice to the good environment secretary: man the post and stand your ground. Look beyond the noise. You have a policy to enforce and you can very well take a few pointers on how the President’s economic planners have previously handled the most difficult situations concerning the economic reform measures.

More than just the policies

What made the country more attractive to investors are not just the economic policies themselves but the government’s firm resolve to be steadfast with their implementation, even at the expense of popularity ratings. A prominent example is the implementation of the revised EVAT law. Looking back, it was as Sisyphean task for the government to push for this reform measure. For one, it was extremely unpopular to do so with world oil prices rising at unprecedented rates. For another, it had to contend with legal hotshots in defending the constitutionality of these laws in the Supreme Court. To make things worse, these happened at the height of President Arroyo’s struggle to defend herself from an impeachment bid in Congress.

Crucial lesson

Apparently, Mrs. Arroyo has learned lessons well from her predecessors’ experiences. Policies are only as good as their implementation. Vacillation and changing rules in the middle of the game at every whining and slightest complaint by some sectors are the greatest mistakes that a policy enforcer can commit. Serious investors plan on a long-term basis. As such, they consider unstable policies to be the greatest risk and disincentive to pursuing their plans.

Take the EVAT law, for instance. When world oil prices hit $70 a few weeks ago, there was a clamor to suspend the EVAT on oil products to ease the impact on motorists and to avoid runaway inflation. It was a tempting, even convincing, scenario to give in to these pressures. However, the government in the end exercised good judgment and resorted to means of providing relief to the public other than suspending the EVAT law. It knew too well that backing down from the implementation of such a major economic reform measure would have dire long-term implications. How did the investing community react to this? The stock market rallied and the index went beyond its 1999 high of 2,632. Other investors also announced pushing through with major business plans knowing that this government means serious business.

Look beyond the noise

The Arroyo administration has learned to be sensible beyond political expediency. We encourage Secretary Reyes to do no less. The situation is indeed noisy, with various interest groups pushing for their agendas. Beyond the noise, however, keep your sight on the goal: generate as much benefits for as many Filipinos and not appease just a select few. Ultimately, this will be your legacy to future Filipinos.

There is just too much at stake here: employment, investments, exports and government revenues. All these can catapult the country from poverty to progress, and improve the lot of Filipinos. We have previously discussed various statistics (see Philequity Corner, April 3, 2006 issue) on what the mining industry can generate for the country. In sum, our mineral reserves as quantified by the NEDA are worth $840 billion. For a start, the 23 or so projects currently being reviewed by government are seen to generate at least $6 billion. It now rests upon Secretary Reyes’s wisdom if these would come into fruition.

The Mining Act is a potent tool to bring about economic development. It only needs proper implementation and strict enforcement of its provisions. We can not afford to keep a backward mentality now as we did in the past decades. Let’s do away with just taking pride of our resilience, as if to emphasize our passivity. Let’s adopt a proactive mentality in harnessing our potentials to, once and for all, achieve sustainable development and long-term progress.