Why the sky is not falling

In the Asian crisis of 1997, the Philippines managed to insulate itself from the worst ravages of the crash because of the key reforms instituted by the Ramos administration to integrate the Philippines into the global economy.

The key policies of liberalization, privatization and deregulation spurred economic development at the time, and then helped erect defenses during the crisis. International business commentators were quite impressed by how resilient the country turned out to be in the wake of the general devastation. It weathered the economic storm in a much better shape than Thailand, Indonesia and other Asean members.

In 2001, the year President Arroyo acceded to the presidency, an ongoing global recession and the events of 9/11 created an economic environment that was highly problematic for the Philippine economy. Yet, the country weathered the year in better shape than most of its neighbors, and there were signs of new interest from foreign investors. In the six years since, the country averaged 5-percent growth in GDP, with last year’s growth of 7.3 percent as the highest in three decades.

We would do well to remember this record of resiliency as we confront the challenge posed to the nation by soaring food and fuel prices. Although a sense of emergency hovers over the nation and the world, the sky is not falling on our heads. The economy and the nation have real strengths that can cushion us from the worst of the global recession. And there are reassuring signs that we will not only cope, but the economy will continue to grow—albeit more modestly.

The report on Monday that the government kept its first-semester budget deficit at about P18 billion—only half of the programmed ceiling—despite the food and fuel price crises is encouraging. Two points stand out in the report:

First, revenue collection improved during the first semester.

And second, our fiscal managers were concerned that the various agencies of the government have not been able to absorb additional funding to help perk up domestic growth. In other words, the problem is not lack of funds, but projects to spend on.

When the President decided that the government would no longer aim for a zero budget deficit this year, it was for the specific objective of cushioning the impact of high consumer prices on the most vulnerable among our people. The government has the resources to provide subsidies to the needy during these trying times. And just as important, it has the funds to put into infrastructure and social and economic programs that will boost economic growth this year and next year.

Inflation for now is our biggest worry, as it hit a 14-year high of 11.4 percent in June. But Bangko Sentral Governor Amando Tetangco Jr. believes the problem should ease before the end of the year, and the country should fully recover by next year.

If you’re wondering why skyrocketing oil prices—with talk of crude hitting $200 a barrel by the end of the year—are not taking the bottom out of the economy, here are a few reasons:

1. It’s not just the price of crude oil that has soared to record levels this year; the prices of other commodities have hit peak levels, as well. This is the difference between this oil-price shock and the shock of 1974. Higher commodity prices across-the-board are also benefiting the exports of the Philippines and other countries. So our import bill is not as crushing.

2. Oil is not as all-pervasive in our economy as many believe. It affects mainly transport. Most of our electricity needs are fueled by other sources of energy, such as hydropower and geothermal energy.

3. The general prognosis of experts is that oil prices should come down during the second half of the year, though not to the same level as last year. The bubble is simply unsustainable. Demand will ease and supply will rise following the basic law of economics.

In this light, I’m convinced that the efforts of Congress in the coming regular session would be better focused not on stop-gap measures like suspending the E-VAT or portions of it, but on measures that will strengthen key sectors of the economy, such as transport, agriculture, rationalization of tax incentives and infrastructure modernization. Such measures do not merely apply band aid to the problem, but a real and lasting solution.

Destroying the question

The philosopher Susan Sontag once wrote, “The only interesting answer is that which destroys the question.” Her words come to mind as I contemplate how the oil crisis will play out in the months and years to come. If we’re lucky, something like what happened in telecommunications could happen in the world of energy. 

Back in 1992, I remember how grim the state of Philippine telecommunications looked. Ninety percent of Filipinos had no phones. And those who had a phone couldn’t get a dial tone. The situation looked beyond solution.

Then mobile telephony was introduced in the country. Almost overnight, we got linked to one another. Today, some 50 million of us have either mobile phones or fixed lines—a ratio of one fixed line to nine mobiles. We may have many problems as a nation, but telecommunications is no longer one of them.

What happened?

What happened is that we Filipinos leapfrogged into the future in telecommunications. Instead of plodding to build fixed telephone systems to service the entire country (which was the original scheme of the Ramos telecoms program), mobile telephony enabled us to jump into the future. So dramatic was the change on our lives that we actually exceeded many western nations in the advanced uses of mobile-phone technology. We literally taught the world how to text messages.

Editorial: Oil E-VAT: Tough choices

FOR a politician who harbors presidential ambitions, Sen. Richard Gordon could have added his voice to the rising clamor for either the suspension or lifting of the expanded value-added tax (E-VAT) on oil. With no end in sight to rising fuel prices, calling for the removal of the oil E-VAT has become the fashionable thing to do. Consumer groups are doing it, so are the leftists, the bishops and, of course, certain colleagues of Gordon’s in the Senate.

Dispatches from the Enchanted Kingdom: Make my day

I had a rather interesting conversation with a friend on Monday. It started when I asked if he had noticed that our club’s peaceful and friendly veranda was suddenly filled with so many military types in civilian clothes.

Sway: Qualification, competence and character

The Way Forward: Why the sky is not falling

In the Asian crisis of 1997, the Philippines managed to insulate itself from the worst ravages of the crash because of the key reforms instituted by the Ramos administration to integrate the Philippines into the global economy.

Market Files: Banco de Oro’s passion

TYCOON Henry Sy Sr.’s signature retailing genius once again shows in Banco de Oro’s (BDO) novel way of reaching out to the country’s overseas Filipino workers (OFWs) while drumbeating the bank’s remittance services and creating a link-up with the so-called unsung heroes.

Japan’s lost decade threatens to be global norm

It’s fitting that Japan chose the Windsor Hotel Toya to stage last week’s Group of Eight (G-8) summit.