Politics blamed for drop in investment

Too much politics has triggered a drop in investments and stifled projected economic growth and targeted investments for the remaining third quarter of 2003 and part of 2004, a stock analyst said yesterday.

"Too much politics is really the factor that weakened our economy and the confidence of investors in the country’s business climate," said Astro del Castillo.

The level of investments in the country, he said, dropped to 20 percent, though portfolio investments are now recovering from a recent drop.

Prevailing uncertainties, according to a survey of the New York-based Roper Asia ASW Asia Pacific, were making businessmen more cautious in hiring and investing.

The survey showed that nearly 21 percent of businessmen, an increase of five percent from the last survey, said they would hire fewer people over the next six months. The percentage of businessmen who said they intend to hire more was unchanged from the last survey at 19 percent.

In an interview with Radio Mindanao Network, Del Castillo cited the United States-Iraq war, the outbreak of Severe Acute Respiratory Syndrome and the failed mutiny last July 27 as some of the causes for the drop in investor confidence for the past 27 months, but pointed to politics as the major factor.

"The opposition should stop grandstanding," he said. "Of course, this is the cheapest way to get the votes, but to the detriment of the economy. Lawmakers must focus on their legislative duties and pass measures like the bill on the financial capital market and other economic reforms."

Del Castillo said the corruption scandal involving First Gentleman Jose Miguel Arroyo should be heard by the court and not by senators.

"It would be better if they will stick to their legislative duties, do their job as legislators so our country can move forward," he said.

Reports have it that the banking industry has been undermined by the insistence of opposition senators on looking into the alleged secret bank accounts opened by Mr. Arroyo using the alias Jose Pidal, despite certifications by seven banks that such accounts are non-existent. Banking experts also say looking into these bank accounts could violate the Bank Secrecy Law.

Del Castillo added that the lack of a clear direction in the country’s political climate has also contributed to instability in the financial market.

His statements jibed with calls from both administration and opposition lawmakers for President Arroyo to categorically declare her intentions for the presidential polls next year in order to defuse what they claim is the prevailing leadership crisis in the country.

The other day, Finance Secretary Jose Isidro Camacho, after meeting with portfolio investors, said political infighting is weighing down the economy and sending the peso down near its all-time low.

"All these political events and political noise are obviously hurting us because it tends to undermine confidence in the Philippines which is unfortunate," Camacho told reporters.

The peso has weakened even further, trading at 55.05 to the dollar late yesterday from 54.96 on Monday. Its historic low is 55.75 to the dollar, the level seen on Jan. 17, 2001 when a popular revolt toppled then President Joseph Estrada.

Camacho said that in a meeting with foreign portfolio investors in Paris, London and Singapore last week, he found they had a "fairly positive view" of the Philippines, citing a strong revenue performance and respectable economic growth this year.

Even the failed military mutiny by some 300 rebel soldiers on July 27 was not too worrisome to the investors, Camacho said, remarking that most of the country’s financial markets "had already normalized," since then.

He said the investors were "accustomed to these kind of events in other emerging markets... so it does not play as important a consideration to them as the fundamental economic numbers."

However, domestic sentiment over the economy is still being adversely affected by bitter political squabbles that have broken out in the wake of the failed mutiny, Camacho said.

He was apparently referring to opposition charges of corruption against President Arroyo’s family as well as rumors of a new destabilization plot against the government.

"This is the reason why the peso-dollar rate continues to be under pressure — because of the dominance of domestic players who are affected by the political noises that we hear, that we read in the newspapers," Camacho said.

He described the situation as "really frustrating" because foreign portfolio investors were happy with the economy and government reforms.

Camacho said there was some concern over the continuity of government policies after national elections in May 2004.

Mrs. Arroyo has said she will not run in the May elections so she could focus on economic reforms but she is widely expected to reverse this position. –Wire reports