Because investors were positioning on the peso, the stock market rallied. Clearly, international funds were positioning on Philippine equities as well – expecting a strong domestic market performance down the road.
A stronger peso is a boon at this time. It will help mitigate rising oil prices driven by anxieties over the situation in the Middle East.
As a motorist who weeps a little every time I fill up my tank, any insulation from spiking oil prices at this time is most welcome. We have to weather the next few weeks of war between Israel and the Hezbollah – and hope that oil prices will begin to soften after.
The strong rally being mounted by our currency and our stock market was sparked by the President’s speech last Monday. In that speech, the President outlined an ambitious plan for rapidly building up our infrastructure – long identified as the principal disincentive to investments in our economy.
That plan has, expectedly, been heckled by those who do not know any better. Those who have lost the capacity to hope. The heckling is a by-product of our culture of smallness, our habits of defeatism.
Any decent gap analysis would arrive at that sort of plan. It details what is commonly referred to as our "infrastructure gap": the elements required to make our national economy operate optimally under present technological and economic conditions.
Such a plan ought to have been drawn up earlier, by leaders willing to imagine boldly and to defy the heckling of the small-minded. It is the sort of plan that will enable the orchestration of investments by the national government, planning by the local government units, support from multilateral institutions, participation by private sector entities and initiatives by people’s organizations.
This plan will produce a synergy on a scale larger than the surprising synergy produced by the design for a "ro-ro" network. We have seen the ro-ro network unfold the past three years, driven much more by private investments than by public spending.
Remember what the builders of the American railway system said in the late 19th century: build the rail and they will come.
And come they did, transforming wasteland into prime real estate, sprouting cities where before that only buffaloes roamed. With the rail, great wealth was produced – not the least for the farsighted tycoons who invested in the rail system.
The infrastructure plan opens investment opportunities. Remember the energy plan we had to rapidly put in place after the power outages of the early nineties. That created magnets for large-scale investments in power plants after these were liberalized.
In order to draw in investments that will help us close our yawning infrastructure gap, the policy environment needs to be improved. The existing build-operate-transfer law – a Filipino innovation replicated in many places elsewhere – ought to be revised and upgraded to be more attractive to direct investments.
The word in the market is that numerous investors are waiting in the wings. They need to be reassured that earlier fiascos such as the Manila Hotel and Piatco cases will not be repeated. They are waiting to see a stronger regulatory regime and more reliable governance practices.
Many of those investors are from close by in the region, including mammoth Chinese state firms, Malaysian and Indonesian conglomerates, South Korean companies. As the frenzied infrastructure buildup in China begins to taper off, there will be a lot of excess capacity in the vicinity. They are waiting for the Philippines to make a strong move to close our own infrastructure gap.
A large number of projects mentioned in the President’s speech are ready to be executed, held back only by right-of-way issues – such as the completion of the C-5 link to the NLEX. The expansion of the SLEX is underway and the connection to the STAR expressway is ready to go. The extension of the MRT will be undertaken by the operators of the existing facility. The Subic-Clark expressway is ready and its extension to Tarlac is only a matter of time.
Two months ago, I visited the Lakeshore property development in Mexico, Pampanga. This large development would have been unthinkable if the policy making Subic-Clark a main hub for industrial growth was not laid down. Similar projects could start up after the overall infrastructure development plan was laid out last Monday.
The infrastructure plan will provide directions to private enterprise and influence business decisions. The investment flow will not only include direct involvement with the provision of the vital infrastructure. There will be parallel investment flows into tourism facilities, light industries and property development.
Without such a plan, indicating what will be built and where, there will be no clear signals for parallel investment flows into other areas of the economy.
When the SLEX was built, there was nothing between Muntinlupa and Calamba but farmland. See what we have there now.
Once the Northrail gets going, we will be able to disperse manufacturing and property development northwards. A whole new urbanized corridor will be opened. Even before the first train runs on new tracks, developers shall have positioned along the route.
A nationwide infrastructure plan will multiply this phenomenon many times over. The plan will be the reference point for tens of thousands of business decisions that will be made over the medium term. It will be the framework within which a broad range of investment opportunities will be spawned.
Financing and executing the infrastructure plan will be investment opportunities in themselves. For this to happen, government must show firm commitment to getting this infrastructure plan going.
More than being just a plan, what the President unveiled last Monday is the focal point for hope.
Our economy can yet be moved to a higher track of growth, a level of economic expansion that will allow us to soak up poverty at a quicker pace.