You have to wonder what some of these international financial pundits are smoking these days. Following in the footsteps of Standard and Poor’s and Fitch, we now have an organization called Capital Economics from United Kingdom lauding the “strong fundamentals” [what a pompous-sounding phrase]of the Philippines; “business climate improving,” a new anti-corruption and “reform minded” government, and a “developing manufacturing sector.” It also opined that a change of leadership in 2016 would be a “setback for the nation.” I have to guess that none of the people who pronounce on these wondrous economic developments have actually been here for long enough to understand how things really are. Also noticeable that no mention seems to have been made of jobs or unemployment.
According to the World Bank as well as some of the intelligentsia, there is a good likelihood of an upcoming real estate- and construction-led bubble, and the Manila Electric Co. (Meralco) is investing in an 800-megawatt power plant in Singapore, and International Container Terminals Services Inc. (ICTSI) is putting its money into a Nigerian port development. No doubt, there are some other of the Philippines big names who are using their massive liquidity to develop anywhere other than in their home country. The best that can be said is that the overseas investments by both Meralco and ICTSI will create more jobs for overseas Filipino workers who can earn abroad and remit back to the family at home to spend on consumption, making for even more economic progress in this consumption- and debt-led economy.
Most of the big ticket development initiatives here in the Philippines become bogged down in a morass of government inefficiency or just simple inaction, or are challenged for some vague reason or other founded on the small print of whatever-regulation-suits-the-purpose sufficient to stop somebody else actually making some progress. The frequency with which major development initiatives get cancelled or put on ice, thanks to some mysteries behind the scenes maneuvering at the last minute, is remarkable. The Philippines business environment is much better at stopping things developing than it is at making progress happen. Better to invest elsewhere where the chances of actually progressing are better than here—like Nigeria.
So if this is a business environment which has improved such as to send the international bankers and financial traders into paroxysms of excitement about the stellar growth of the Philippines economy, then good luck to them. They obviously know more than the local business people and investors do about doing business in the Philippines.
But this is all very confusing. I know my own investor experience and what a trial that has been, and continues to be. One thing for sure is that rationality has absolutely nothing to do with investing in the Philippines, personal objectives, whatever they may be continuously trump rationality and only those in the know will have any idea of who has personal objectives, which run counter to somebody else’s getting a return on their investment.
Apparently according to at least one local investment banker, the Philippines “does not need FDI [foreign direct investment], there is plenty of money here.” A rather unusual statement given that the rest of the world depends a lot on foreign direct investment, but then it was made by a banker. I haven’t noticed too many new eager foreign investors snooping around here recently. There is an ever widening gulf between the views of the bankers and financial people and actual business decision making and some would say; well, it’s about time there was a realization that bankers, despite their powerful position in having other people’s money at their disposal, don’t actually know what to do with it. By extension, neither are they equipped to advise other people what to do with their money. Banking is not a risk business at all; bank people cannot assess business risks in areas about which they know nothing. They are not even very good at studying trends and buying and selling, although they do excel at debt collection and stiffing people for usurious interest rates on consumer finance. HSBC took it upon themselves the other week in the United Kingdom to require customers who wished to withdraw “large sums” from their own accounts to prove complete with documentation, what the money was going to be used for! This was claimed to be in pursuit of protecting the customers interests—ha! Protecting your interest by not allowing you to withdraw your own money.
Anyway, back to the mixed signals about the Philippines as an “outstanding” investment destination. Well, I think that it is an excruciatingly difficult investment destination, the business climate is not getting better—it is getting worse; a rule of law is nonexistent, there are more empty condominiums than can be counted, unemployment and poverty are at stellar levels, endemic corruption is accepted as normal, and even the local oligarchs are perhaps seeing better prospects in investing abroad. But perhaps the bankers know better, and in any event the Philippines apparently does not need FDI so any potential investors may as well look elsewhere, at least until such time as most of the local capital has taken flight.
Mike can be contacted at firstname.lastname@example.org