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I
REMEMBER having written in one recent column that it was
still too early to say that the global economy was
improving just because oil and food prices were coming
down from their record peaks in July.
I
mentioned the subprime problem in the United States,
from which losses had reached $500 billion, and its
impact on the global financial system, including ours.
And I even noted that the losses could ultimately reach
$1 trillion.
Now, as
we all know, Lehman Brothers, one of the world’s biggest
investment banks, has filed for bankruptcy. Merrill
Lynch avoided the same fate when Bank of America agreed
to buy it for $50 billion. And American International
Group, which owns Philamlife in the Philippines, was
bailed out by the US Federal Reserve with an $85-billion
loan.
Fitch
Ratings, in a preliminary investigation, said the impact
of the Lehman Brothers’ collapse on banks in the
Asia-Pacific was limited, except for Japanese banks,
which held substantial amounts of Lehman Brothers’ debt
notes.
Here the
Bangko Sentral ng Pilipinas (BSP) also promptly
conducted a survey among domestic banks to find out the
extent of their exposures in Lehman Brothers. Several
banks disclosed their exposures and the provisions they
made to cover possible losses.
The
total exposure of domestic banks, according to the BSP,
is small, and could easily be absorbed by the banks,
which are at their strongest in terms of capitalization
and resources, as a result of the continuing reforms
implemented by the central bank.
That was
part of the presentation of BSP Governor Amando Tetangco
Jr. at the midyear economic briefing on September 17. It
was indeed a timely assurance for the public that our
banking system is sound and stable.
In
general, the presentations made by the economic team
during the mid-year briefing showed that while we
continue to face challenges, we have the resources and
capability to face them and drive economic growth. The
team members did not hyperventilate. That was a
commendable thing. It didn’t cause panic!
As I
have repeatedly said since the global energy and food
crises erupted, panic is a very contagious thing. The
economic team’s presentations were informative and
factual, and the assurances were comforting.
But, you
know, the assurance that the people need is the
immediate translation into deeds of the steps spelled
out by the economic managers in strengthening our
defenses from the fallout generated by the collapse of
Lehman Brothers and other American financial giants.
In other
words, the colorful PowerPoint assurances should be
translated into real programs. One of the steps is the
increased spending on infrastructure. That is a good
prescription because public construction creates a lot
of jobs and stimulates other economic activities.
I
recall, however, that during the first six months of
2008, despite the government’s pronouncements to
pump-prime the economy to counter the contractionary
effect of higher inflation and weak external demand,
actual government spending declined by 1.9 percent,
compared with a 10.8-percent increase in the same period
last year.
We have
the resources to implement infrastructure projects, no
question about that. But having the money solves only
part of the need for roads and bridges. Have the red
tape and procurement issues been addressed? Has the lag
time between fund release and groundbreaking and
completion for projects been shortened? What will be
done to help exporters? What trade diplomacy is being
pursued to find new markets? Is there a menu where aid
manufacturers can select from and ask the government,
for example?
Some of
these questions were answered during the briefing.
Budget Secretary Rolando Andaya mentioned the reduction
in the validity of cash-utilization authority issued to
agencies from one year to one month to persuade these
agencies to utilize funding for projects promptly.
Secretary Andaya’s plan to publish a book that tracks
the progress of projects and expenditures as provided
under the General Appropriations Act is also laudable.
It would certainly keep officials and agencies
implementing projects on their toes. Publishing the
winning contractors for all projects is also good for
transparency and should serve as a deterrent to
corruption.
In
exports, I support Trade Secretary Peter Favila’s plan
to develop new markets for Philippine products, just
like Cambodia, Myanmar, Laos and Vietnam, which are also
members of the Association of Southeast Asian Nations (Asean).
The Asian Development Bank itself has advised the Asean
to increase intraregional trade to cope with the
slowdown in the traditional western markets—the US and
Europe.
One
thing I agree with the economic managers is we have a
resilient economy. It was this resilience that enabled
us to grow by 4.5 percent in the first semester despite
the global crises. Spending more for infrastructure,
which was absent in the first six months, should boost
growth in the remaining months of the year.
With
remittances from overseas Filipinos continuing to grow
in double digits, the traditional high consumer-
spending level in the fourth quarter, the slowdown in
inflation and lower fuel and food prices, our economy
still has a good chance of growing faster than it did in
the first six months.
Yes, I
am confident that for the full year we can still achieve
5-percent gross domestic product growth. The private
sector is doing all it can to boost economic activities.
The ball and the money are in the government’s hands.
All it
needs to do to beat the odds is to do it!
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