The sovereign credit rating upgrade of Standard & Poor’s (S&P) granted to our country last week is indeed a spot of good news, a “gift†that almost coincides with the country’s Mother’s Day celebration last Sunday.
For starters, this upgrade means that the Philippines is just two steps away from that deliriously heady A grade in the S&P report card, even if that’s going to be still on the lowest rung of a seven-notch climb to the prime AAA rating.
Last year, the Philippines was given a BBB- rating by S&P, which signified that the country had finally shed off of its non-investment grade cloak, something it had been wearing – and direly trying to lose – for ages.
Eventually, two other major credit rating agencies, Moody’s and Fitch, had released their own ratings upgrade to match the S&P diagnosis. And with last week’s BBB ratings upgrade by S&P, we can expect Moody’s and Fitch to follow suit soon.
More important in the S&P reading, though, is the recognition that the Philippines has hurdled the sustainability rung, an important milestone in a country’s perseverance to attain economic strength. It can be likened to a point of no looking back.
If compared to a runner, this is akin to having made that first spring forward from the starting line, of unleashing energy to making a leap that will propel him forward with a momentum that can no longer be stopped. That’s well and good.
Two more races
Now that we find ourselves dashing to the finish line, all attention must be given to making sure that we don’t run out of breath or wobble at the knees lest we collapse and fail to cross the checkered flag – or rather, two more checkered flags.
Remember that we have to get to BBB+ (or Baa1 for Moody’s) before getting an A minus.
At this critical point, the central leadership must be able to explicitly state just how exactly are we to proceed from point BBB to point BBB+, and from point BBB+ to point A-. There’s no point in running if the race lines are not defined.
Much more work to be done
In a statement, S&P said that its decision to upgrade the Philippines’ sovereign credit ratings was because of ongoing reforms to address shortcomings in structural, administrative, institutional and governance areas which would help it “endure beyond the current administration.â€
Specifically, S&P was looking at how the government was doing progress in fiscal reforms such as generating more revenues, spending more efficiently, and improving the public debt profile and investment environment, such that any gains would be carried even after the end of the current administration.
While these are indeed accomplishments that deserve a
pat on the back, the reality is that these are still baby steps, and that much more work is needed to be able to cross the line to the A grade.
Now that the basics of sound fiscal governance seem to be in place well into the next half of the decade under a new president, it would seem a good time for P-Noy’s administration to look closely at improving the economy’s investment potential.
Let’s face it. The Philippines does not really have a stable economic base except for the revenue stream of its overseas migrant workers, which has kept the domestic consumption index growing for several decades now.
And neither has the past credit ratings upgrades been sufficient to influence foreign investors to made that all-important investment decision in any major industries or sectors of the Philippine economy.
The role of a CEO
If ever there have been any new investments lately for the Philippines, these are generated by local companies such as San Miguel, PLDT/Smart, Ayala, and other similar businesses that have returned whatever income they had generated back into growing their home businesses.
A cursory look at most of the public-private partnerships entered during the current administration will show that these have been funded by any one or several of the local conglomerates, and there are few foreign companies involved.
Filipinos are thankful for the tycoons that head these local companies – they are men of great vision who have the keen sense of bringing their businesses far into the future, and in the process, taking care of their employees.
How I wish we had the same caliber for the top tycoon that heads this country. Perhaps, in a sense, his mission was to ensure that fiscal reforms through a “daang matuwid†ideology would be accomplished before any other economic goal is set.
Then perhaps, we need to pray that the country’s next CEO will be one who envisions the path to true economic emancipation for the Philippines.
Needed: a vision
What the country needs at this crucial time is that one big idea, and from thereon, the master plan that will become the bible of the whole government. Will the Philippines want to own agriculture? Or perhaps, should we focus on tourism? Should we still vie to become a manufacturing center? If so, what industries?
Having decided on a goal, it is important to define the kind of roads that need to be taken to reach the end. What infrastructure investments are needed to get to the goal? How can we entice these investors to seriously consider the viability of the projects?
Only by making sure that these targets are achieved will the country be able to move to the next goal, and eventually more goals. And only then will we be comfortable in achieving more credit rating upgrades that will really matter in our long-term objective of a not only a resilient but a strong economic foundation for future generations of Filipinos.
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