Enter the Graduate . . .

Accidental President removes the stigma

Doris Dumlao, ATI Correspondent

FIVE years after taking office, President Benigno Aquino III has some wanting a change of Constitution to allow him to serve a second term from 2016 to continue a reform programme which is rekindling investor confidence . . .

MANILA ­— He is on the final stretch — for 2015 is the last full fiscal year of office for President Benigno Aquino III as CEO of the Philippines.
 Since he assumed office in 2010, the country has rekindled investor confidence, shaken off the “sick man of Asia” stigma, and become one of the region's fastest-growing economies.
"Aquinomics", anchored largely on a platform of good governance, has helped the sovereign graduate from “junk bond” to investment grade status for the first time in history, beating Indonesia in getting such imprimatur from all three major global rating debt watchdogs —Moody's, S&P and Fitch.
The Philippines has likewise significantly improved its global competitiveness rankings.
The consensus view is that a lot has been accomplished in the last four years — not bad for a President who never aspired to be in this position but was thrust into the candidacy by chance, when his mother, the late democracy icon and former President, Corazon Aquino, passed away.
Benefitting from the intrinsic "fruit of the good tree” branding, he used his political capital to champion a reformist stance at a time that the nation needed relief from corruption issues during the nine-year Macapagal-Arroy Administration and the short-lived Estrada Presidency.
The Philippines is also seen to be entering a demographic “sweet spot” by next year — that window of opportunity when a big portion of the 100-million population will have reached working age. For a country already generating a lot of its growth momentum from business process outsourcing (BPO) and overseas Filipino remittances, such a demographic dividend story is seen as very compelling for investors.
For its part, the Government has done a decent job at communicating its turnaround story, allowing the global community to take a closer look by hosting the World Economic
Forum East Asia Summit for the first time last May.
Meanwhile, 2015 has been declared “Visit Philippines” year, in time for the visit of Pope Francis to this predominantly Catholic nation and hosting of another major international summit, the Asia-Pacific Economic Co-operation (APEC) meetings. These will build on the success of the “more fun in the Philippines” tourism rebranding.
The Philippines will also soon have its own small version of the Las Vegas integrated gaming resort strip along Manila Bay. The first complex, Pagcor Entertainment City, Solaire Resort & Casino, which is owned by a local tycoon, Enrique Razon Jr., launched early last year and is opening a new wing before year-end.
City of Dreams Manila, a partnership between the SM group and Macau's Melco Crown group, is also set to open this year.
Resorts World Bayshore City, a tie-up between the Genting group and local tycoon Andrew Tan, will open a second hub by end-2018.
Another complex, Manila Bay Resorts, owned by Japanese tycoon Kazuo Okada, is under construction.
For 2015, the Philippines is seen keeping a high-growth, low-inflation trajectory. The Government is aiming for a 7-8 per cent growth in gross domestic product (GDP), although the consensus growth forecast is more conservative at 6.5 per cent.
The World Bank expects growth to rise to 6.7 per cent next year from 6.4 per cent this year, while the International Monetary Fund sees growth of 6.3 per cent next year from 6.2 per cent this year. Inflation is targetted by the central bank to stay within a range of 2-4 per cent from this year's band of 3-5 per cent.
Net foreign direct investment (FDI) in the first seven months of this year reached US$4 billion, based on latest data from the central bank. Equity capital investments during the period — coming mostly from the US, Hong Kong, Japan, Singapore, and Taiwan — were channelled mainly to activities related to finance and insurance, real estate, manufacturing, wholesale and retail trade, as well as transportation and storage activities.
Compared to what China and Southeast Asian neighbours are getting, these numbers are unimpressive, but considering that the Philippines has long been a laggard, it is seen as a good start towards rebalancing the economy, long reliant on consumption alone, towards investment-led growth.
Note that annual FDI averaged only US$1.4 billion from 1990 to 2009, and was nearly non-existent during the politically tumultuous period of 1970 to 1989.
Karim Raslan, Chief Executive of KRA Group, a Southeast Asian public affairs consulting firm specialising in stakeholder relations, political risk and business advisory, aptly commented that Aquino has a “charisma deficit”, but noted that he had “delivered” anyway.
For such a leader, Raslan said, one six-year term may not be enough, and he urged the current regime to use its political capital to “change the rulebook”. Indeed, it was floated recently that Aquino may consider running for a second term, although this isn't legally feasible unless the country amends the Constitution. There's just not enough time to do so before the 2016 Presidential polls.
ING Philippines economist, Joey Cuyegkeng, said the country would likely sustain its “sweet spot” over the next few years.
The trend GDP growth rate under the Aquino Administration (2011 to 2016) is seen at around 6.3 per cent, led by the rebound in the industrial sector and the resilient services sector. This rate will beat the numbers during all post-EDSA Revolution predecessors: 4.8 per cent under Macapagal-Arroyo, 2.3 per cent under Estrada, 3.1 per cent under Ramos and 3.4 per cent under Aquino's mother.
But the Aquino Presidency will leave many stones unturned. The rollout of an infrastructure-building programme underpinned by the public-private partnership (PPP) framework, much hyped early in his term, has been slower than desired by most investors.
At present, seven PPP projects have been awarded: Daang Hari-South Luzon Expressway (US$47 million); school infrastructure project Phases 1 (US$397 million) and 2 (US$86 million); Ninoy Aquino International Airport (NAIA)
Expressway (US$345 million); modernisation of the Philippine Orthopedic Centre (US$126.44 million); automatic fare collection system for railways (US$38.22 million); Mactan-Cebu International Airport terminal upgrading (US$389.33 million); and Light Railway Transit 1 extension to Cavite and operation and maintenance (US$1.44 billion).
Business wants to see fast-tracked implementation of the PPP programme during the remainder of this Administration.
Outside of PPPs, the Government's own infrastructure expenditure programme, targetted to rise to 4.1 per cent and to 5.0 per cent of GDP by 2015 and 2016, respectively — from a measly 2.6 per cent this year — is seen as being constrained by the “pork barrel” scandal, which also indicated that there's a long way to go to weed out corruption in the Philippines bureaucracy. A Supreme Court decision declaring some aspects of the executive's discretionary spending under the Disbursement Acceleration Programmme (DAP) unconstitutional has also cut off its flexibility to use fiscal savings for spending priorities.
Despite its bid to attract more foreign investors and tourists, the main gateway to Manila is deemed as one of the “worst” airports in the world. The Government is now renovating NAIA Terminal 1, while a number of foreign carriers have moved their operations to the under-utilised NAIA Terminal 3.
While all agree that the Philippines must look for options to cope with heavy traffic, no firm decision yet has been made on where to build a new gateway to the metropolis.
The conglomerate, San Miguel Corp, has announced plans to build a US$10-billion new airport along Manila Bay.
Meanwhile, the traffic situation in the National Capital Region has gone from bad to worse, especially during the rainy season,
aggravated by ill-synchronised public works but largely due to poor urban planning and lack of discipline among public utility vehicles.
Many analysts also see a looming power shortage as a big risk to macro-economic fundamentals, but are hopeful that this could still be prevented by taking action now. The President is asking Congress for emergency powers to address the situation, but some economists warn against “quick fixes”.
For example, Energy Secretary Jericho Petilla’s proposal for additional solar and wind power has drawn flak from a economists who believe that 20-year take-or-pay contracts would be very costly for consumers.
There are jitters over the creation of an integrated Southeast Asian economy under the ASEAN Economic Community by 2015.
While many of the large companies have long prepared for one ASEAN because tariffs have already been reduced since 2008 under the ASEAN Free Trade Area (AFTA) agreement, most small, medium and micro-enterprises may be left out.
Finally, there is a lot of concern over whether the Philippines’ turnaround can be sustained beyond 2016. The quest for inclusive growth remains elusive at this point, as the country needs to grow faster for a sustained period of time to make a significant dent on poverty alleviation and job creation.
Poverty incidence in the Philippines is estimated at 25.2 per cent, with fisherfolk and farmers posting the highest poverty incidence rates at 39.2 per cent and 38.3 per cent, respectively.
“With the right leader, the Philippines will continue to outperform its Asian peers,” CLSA Philippines Country Head, Mitzi De Dios, said in a research note titled “Make or Break.”
If reforms  continue after 2016, she says multi-year real GDP growth of 8.0 per cent yearly is achievable. From a nominal GDP of US$305 billion in 2015, this means hitting a US$525-billion economy by 2020.
Looking to the 2016 Presidential election, the leading Presidential candidate so far is Vice President Jejomar Binay (a long-time Makati mayor), but he is under scrutiny for alleged ill-gotten wealth.
“Makati’s poor, with whom Binay strongly identifies, benefit from the city’s success through educational scholarships and free healthcare,” De Dios said. “Applying the same benefits nationwide could lead to lower poverty levels, further narrowing the rich-poor gap and fuelling expansion of the middle class.
“Having been born poor himself and orphaned early in life, Binay has a soft spot for the underdog. For him, the country comes first and his programmes are aimed at benefitting the majority rather than the few.
“The $64,000 question is whether Binay, if elected President, will remain steadfast in his resolve to lift the Philippines to greater heights — or succumb to the allure of power.”