Firewall

We can’t send Alan Peter Cayetano to an asylum. But we have done a pretty good job insulating our economy from his antics.

So too the antics of other politicians of his ilk who will compromise the national interest for a day of grandstanding.

The numbers show that quite eloquently. The most dramatic element of this being the behavior of the peso.

When our obsolete, stability-challenged political system began showing signs of entering yet another round of perennial turbulence, the administration adopted what it called a "firewall" strategy. The main feature of that strategy was to insulate, as best possible, the economic management team from the dysfunctional politicking that threatened to consume everything in its path.

That strategy also required the country’s chief executive to muster the political will to do what needs to be done to restore our nation’s fiscal health – regardless the political costs.

And so it was that the decision to push on with the reformed VAT was taken. In a country that despises taxation and a public that would rather that its government run into debt than improve revenue collections, that decision required that the President expend a considerable amount of political capital.

The militant groups, who exploit every populist drift to build up their political stock and, they hope, prepare them to overthrow the state, mounted rally after rally against the VAT. They have never been so wrong.

The President’s popularity might have taken a nosedive, an outcome that encouraged destabilizers and made a cottage industry out of impeachment efforts. But the decision on the VAT shored up our fiscal position, improved out credit outlook, reduced debt service and convinced the international investment community that, the political carnival notwithstanding, the nation was back in business.

That was the turning point, as far as the economy was concerned – disturbed only in a minor way by frustrated coup attempts and frustrated impeachment moves.

The day after the second impeachment attempt was quashed in a benevolently timely way by the House majority, the peso began to strengthen dramatically. It has not looked back since.

The improvement in the peso’s exchange value helps every citizen. It mitigates the adverse impact of the high global oil price regime. It keeps the inflation rate low and prevents rising prices from wreaking havoc on the purchasing power of wage-earners.

Low inflation, improved dollar reserves and a desirable liquidity picture has kept interest rates low. That keeps the cost of money low and encourages people to invest.

The militants and the opportunistic politicians would rather have run-away inflation and rioting in the streets. They do not have our people’s well-being sincerely at heart.

It is not only the peso that is driving forward.

Our first half growth performance surpassed all projections with GDP pushing ahead at 5.5 percent despite the tough oil price regime. Its main driving force is agricultural growth, export performance and strong domestic consumer demand.

The country’s GNP rose 6.6 percent due to increased remittances, a robust balance of payments surplus and prudent management of our debt.

On nearly every measure, the national economy performed very well.

Our exports during the first half of this year grew 17 percent despite industry forecast of only 10 percent growth and the government’s conservative target of 8 percent. Foreign direct investments advanced by 52 percent over last year despite an unwelcoming constitutional framework. Month-on-month, portfolio investments grew 10 percent at the end of July.

Remittances from our OCW community expanded by 15.4 percent, fueling property development and boosting consumer demand. Our gross international reserves now stands at well over $21 billion – the highest it has ever been in our history.

We have had our share of calamities: the usual floods, the spectacle of several volcanoes acting up in concert and that ugly oil spill off Guimaras. None off them seriously hampered our roaring economic performance.

At the start of this year, the only wild card in our economic planning was the price of oil – which we could do nothing about even if the leftists picket the oil companies every day for the rest of their lives. The trouble in Lebanon and Iran’s stupid obsession with plutonium appeared to push oil prices to the edge. But things appear to have settled down and oil prices have started to soften.

The softening of global oil prices, combined with the strengthening of the peso, allowed two rollbacks in succession. More is likely in store. That is good for our people.

The only calamity that could seriously throw us off our tracks is our terribly immature politics.

The only structural solution for that is to change our constitutional framework so that those to aspire to high office will work through the disciplines of party systems rather than try to get by on cheap grandstanding. We have to move beyond the politics of mere name-recall if we are to cure the poison that causes our political malaise.

In the meantime, we have to bear all the scandal-mongering and insipid carnivals that try to turn our democracy inside out. We cannot expect this sort of politics to provide a longer horizon to our national agenda.

The best we can do is to strengthen the firewall that sets apart the functional part of our national life from the dysfunctional.

We may not be able to send Cayetano to an asylum. But we will have to treat the politics he represents as part of the scene from a madhouse. We must not allow such irresponsible behavior to undermine business confidence.

Otherwise, our entire population stands to lose.