Effect of US shutdown, Gokongwei’s diversification

Ej Lopez

Ej Lopez

The nation was rocked by the recent development unfolding in the United States Federal government; it’s all about the US Federal Government shutdown. Those who were too young to remember then; the US Federal government was this position 17 years ago. Effectively, a shutdown could lead to something economically tragic and in fact has already taken its toll on the international bourse almost immediately after the pronouncement.

But how does it compare to the traditional view of what bankruptcy is all about? Although the shutdown is a budget-related phenomenon, it does not necessarily imply that a serious monetary problem does exist. The US shutdown though was a result of a deadlock among the members of the Congress. A bankruptcy on the other hand is a self-initiated declaration of insolvency of an individual or an entity, mainly because of the inability to repay its financial obligations. This deadlock was made possible by a Republican-dominated House of Representatives, where President Barrack Obama is not a party to (Obama is a Democrat).

Although the situation may bring chills economically to the US financial and economic milieu, it does not necessarily imply that an impending bankruptcy is about to ensue. In the first place, the shutdown was primarily brought about by a Congressional deadlock or disagreement, which in its current context is political in nature. Primarily, the reason is the budget-wrenching health care program, popularly known as “Obamacare.” The law will have a far-reaching effect on the budgetary allotment of the Federal government, which consistently has been in dire position since the Bush regime and in fact even earlier than that. Although the shutdown sent wrong signals to both the local and international community, it has no direct impact in the local Philippine market. In the first place, the problem is not expected to last for more than a few days. If there is any economic transition that may transpire, it should be more to the local advantage like appreciation of the peso vis-à-vis the US dollar, investments (foreign and local), and decrease in the world oil prices because a non-operational US economy implies a slowing down of the industrial arena, resulting into lesser demand and international transactions.

However, such rare occurrences may result into a falling out of investors who up to now still possess that trust and confidence in the “land of milk and honey.” The situation only affirmed the weak economic leadership and political stronghold of the Obama government. Although, this should not be allowed to happen; but the series of events that transpired illustrates the possible grim scenario that is about to unfold if these political series like involvement in foreign arms struggle, White House-sponsored bills and the likes continue to encounter rough sailing in the legislature.

Locally, the short-term implications may be beneficial in the sense that in the days ahead, we are going to see an appreciation of our currency despite doing nothing; additional investments to pour likewise, and temporary bull run may occur in the local bourse because of possible investment “exodus” from the US to our local market. These indicators are mere temporary in character and as such may have a short-term effect.

The more gloomy reality is the possible protracted incidence of economic crisis in the United States. We should remember that US is an economic leader, and as such its economic soundness is a must to the international community. It should be noted that locally, the US is our biggest trading partner and also our biggest benefactor in terms of foreign aid. Therefore, any economic breakdown that may affect them locally will have long-term repercussions to the rest of the world, because of the long standing perception and acceptance of their economic and political influence and leadership to the rest of the world.

Gokongwei Group making their presence felt
The recent pronouncement of the Gokongwei Group of a buyout of the food and beverage conglomerate San Miguel Corp.’s 27-percent share in the Manila Electric Co. (Meralco) signals the start of something good and vibrant about to transpire in the Philippine business industry. Gokongwei’s impending entry into the country’s largest power distributor firm explicitly implies large-scale investment and diversification of one of the country’s business conglomerate into the utility business. This possibility has practically completed all the necessary ingredients of what a dominant business realm should be.

The grand old man John Gokongwei started out selling soap on a bike; the name Gokongwei, at that time, never even rang a bell. Now, the patriarch, philanthropist and entrepreneurial pioneer holds the reigns as Chairman Emeritus and Founder of JG Summit Holdings (http://www.entrepreneur.com.ph/article/get-inspired-the-john-gokongwei-story).

From a humble beginning, it has invested and made considerable success in real estate, food, banking, airline, telecom, retail, publishing and petrochemical. Its no-nonsense approach to business entrepreneurship has spawned the conglomerate into one of the most successful business empires this part of the region has ever known.

The seriousness of purpose the Gokongwei Group has displayed, exemplify their confidence in the local economy and its growth. As such, his recent interest to invest in the power distribution business bared his long-term interest and belief in the Philippine economy and its leadership. The result of which will redound to economic growth by way of long-term investment and local employment.

For comments email: doc.ejlopez@gmail.com
with cc to: opinion@manilatimes.net.


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1 Comment

  1. Pitong Daspalas on

    This is the direct result of having the most idiotic, incompetent and most dishonest president in history of the United States. His signature Obamacare healthcare is toxic; 67% of Americans do not like it. The democrats who voted for it (not one single Republican voted) including the president, the Internal Revenue Service employees and the biggest Unions in the land, all of whom push this stinker through, DO NOT even want to be under this healthcare law. It’s tantamount to cooking a meal, and make it mandatory for the guests to eat it, but exempt your friends (including you) NOT to eat it because it is poison. The premium for the Obamacare is more than doubled in a lot of states, and there’s lots of basic info, such as who does one goes to for health assistance with this insurance? How much co-pay one pays for a doctor’s visit, etccc.. And this is mandatory for everyone, except of course Obama’s friends. This is also a job killer, comapanies not hiring people simply because of the benefit coverage. This is the only cause why the Republicans do not want to fund Obamacare. People will suffer from this law. Obama does not care, for him, it’s about saving face, even though he has to step on people’s head, like he’s doing now. Philippines, you’re not missing him (his cancelled visit to the Philippines); on the contrary, all you hear from him are lies.