There’s growth after Aquino

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AFTER the myth that President Benigno Aquino 3rd’s reforms supposedly kickstarted the economy’s growth surge, the new dubious line media and analysts are bandying about is that the country’s resurgence may stall once his administration ends.

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Both story lines are wrong, though they have held sway among investors, experts, and journalists who should know better. And constantly these reform myths, while helping the Aquino’s camp’s push to stay in power beyond next June, wrongly worries and discourages business.

In truth, there is no reason to worry about the economy after Aquino’s departure.

Let’s go over some oft-ignored facts. First, the current economic momentum has been building for 17 years since 1999 — over a decade before the present administration started in mid-2010 — the longest uninterrupted period of annual increase in Philippine gross domestic product in at least half a century.

GDP has kept growing since the end of the 1997-98 Asian Crisis, despite the second People Power uprising and the 9/11 terrorist attacks in 2001, the 2001-03 economic slump in the West, wars in Afghanistan and Iraq, the SARS pandemic, skyrocketing oil and food prices in 2007-08, political unrest under then President Gloria Arroyo, and megastorms almost yearly over the past decade.

Even in the depths of the 2008-09 world financial debacle, when most major economies shrank, the Philippines was among a handful that kept growing, boosted by dollar earnings from overseas Filipino workers (OFWs) and business process outsourcing (BPO), as well as countercyclical public spending prodded by weekly or fortnightly Arroyo Cabinet meetings.

Having weathered all that, is the growth momentum going to stall just because Aquino steps down? Really now.

Growth drivers remain after 2016
Consider this: crucial factors fueling growth aren’t suddenly going to vanish. Certainly not the fiscal measures enacted in 2005, implemented since 2006, and cited by credit rating agencies for the Philippines’ sovereign debt upgrades.

Sound macroeconomic policy under independent Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr., appointed in 2005 and reappointed in 2011, will continue at least until 2017, when his second six-year term at the BSP’s helm ends.

And reforms lifting ease of doing business and world competitiveness rankings, done under the Anti-Red Tape Act and the National Competitiveness Council (ARTA and NCC have been around since 2007) need not be reversed.

Some $50 billion a year in OFW and BPO earnings support consumer spending and property development, the top expansion drivers under Aquino. That largely recession-proof flood of cash won’t disappear after he leaves Malacañang.

Neither will the vast infrastructure built in the past decade and a half, especially the Nautical Highway network of roll-on-roll-off ports, which trebled domestic tourism and inter-island trade, and more than 60,000 km in roadworks, both new construction and maintenance, since 2001, as claimed by the Department of Public Works and Highways (48,585 km up to 2009, and about 14,000 since).

Add to that reported DPWH achievement some 30,000 km of farm-to-market roads opening up new agricultural areas — most of the FMRs under the 2004-10 Medium Term Philippine Development Plan (MTPDP). Even discounting these possibly inflated figures by half or more, the actual tarmac laid remains after Aquino.

On chronic electricity shortages, the Department of Energy announced in January a total of 5,198.4 megawatts of new generating projects nationwide committed by investors till 2020. If built, the facilities could more than match the projected 3,300 MW capacity needed in the next five years under the DOE’s 2009-2030 power development plan. Given the huge political and economic cost of brownouts, any future government will work hard to ensure that the announced projects happen.

To be sure, much more needs to be done on infrastructure. From 2 percent of GDP in the past decade, public works spending declined to 1.4 percent in 2011, as state construction halved in the first semester. In succeeding years, government outlays contributed less than 1 percent of annual GDP growth, and in 2015 it fell short of budgeted amounts by about 1.4 percent of GDP in the first quarter.

The next administration could lift spending with more diligent presidential monitoring and prodding, and none of the illegal funds juggling under the Disbursement Acceleration Program (DAP), which affected P157 billion in outlays. There are also P1 trillion in public-private partnership undertakings finally approved for bidding after years of delay. All that would hopefully help achieve the ambitious infrastructure spending target of 4-6 percent of GDP in coming years.

What about corruption?

Perhaps the biggest worry over the next president is corruption, especially with the dominant Liberal Party’s unrelenting campaign to publicize graft allegations against Vice-President Jejomar Binay, until recently the leading presidential hopeful in voter preference surveys.

However, corruption in the next regime is more likely to decline. For one thing, sleaze under Aquino’s watch has actually reached record levels, from which it is more likely to drop rather than rise further.

Smuggling leapt five-fold to $19 billion a year, from $3 billion average in the previous decade, based on International Monetary Fund trade data, with unheard-of revenue losses of P200 billion, by Aquino’s own count.

Pork barrel, now illegal, trebled since 2011 to more than P20 billion a year, while the P157-billion DAP is the largest amount of malversation ever in Philippine and perhaps Asian history.

Among other dubious transactions, anomalies in military aircraft procurement (P26 billion, cited by state auditors), license plates (P15 billion, bid out even with no budget allocation), and the Metro Rail Transit (alleged bribe solicitation of $30 million) dwarf anything in the past.

It’s hard to imagine how a future leader can top all that and not stir widespread outrage. Especially with press and public more vigilant against sleaze, as noted by respected economist Bernardo Villegas.

So don’t worry about Aquino’s exit. The economy was already on a growth path well before him, and it should stay on that course after him.

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10 Comments

  1. Leodegardo Pruna on

    The previous Finance Secretary, Hon. Roberto F. de Ocampo, made a dent on the economic stability and sustenance of the country. The present does not measure up to that accomplishment of the former because of lack of acumen and purely bad (PUROSAMA) decisions framed by A BAD man whose only credentials is being a member of the walang (HYATT 10).. P-Noy is running out of time, he better dismiss the incompetent people around him to at least save what is remaining of him to make a good little legacy. God bless the Philippines.

  2. The President has succeeded in winning everything he wants in his term, in his smartmatic way he can easily choose his successor and with all the government budget at his disposal, he can get what he wants. The president has really won his achievements for the past fiver years.

  3. Dominador D. Canastra on

    Right on! Very very good assessment of this liar president’s performance!

  4. To the Author,
    After reading your article on the future of the Philippine economy, post Noy Noy, I was hardly filled with hope. I see that one of the economy drivers is the funds sent home by the OFWs, a recent report released in Australia said that 50% of current jobs will become redundant here in 5 yrs because of technical advances. These include, heavy machinery operators, already remote controlled vehicles are used in mines, computerised motor mechanics, already here, driverless cars on their way, requiring less traffic control officers and police, it doesn’t stop with the menial jobs but includes Lawyers, all available online, Doctors, available online, specialists can and do regularly perform operations by robotic surgeons in different countries. etc. All these things are coming to pass. Our investment gurus so entrenched in cyclic economics have no answers to the post GFC and look to China to fix all monetary Ills, but just now the China bubble look like bursting and remember that Communism is only 75 yrs old in that country, prior to that there were 800 warlords and centuries of tribal conflict. When funds dry up these will once again come to the fore. The union will collapse like the Soviets, and the attempt to consolidate Europe as a single identity is already doomed, after generations of the worst warfare the earth has seen. If you want to see the future look back to the past

  5. Surely , No-one in their right mind would be worried about Aquino’s exit . With the exception of Aquino himself. But then again , he is not in his right mind !!!!! THE SOONER THE BETTER. !!!!!

    • What about the rest of the government that has been his willing accomplices in the plundering of the philippines ?

      De Lima. Ombudsman Morales, Tan ?

      The 15 senators on the Napoles list that were never charged ?
      The 100 house members who were never charged ?

      The other appointee’s that did nothing except enrich themselves ?

  6. We are not worried about Aquino’s exit. We would have liked to hasten it. When he said goodbye in his SONA, I was ecstatic momentarily but I realized it wouldn’t be until June 30 of next year. There is nothing good in Pnoy’s six-year reign that is worth remembering. On the contrary, PDAF and DAP, the Mamasapano massacre, the Yolanda super typhoon and the government failure to soften its impact, the selective justice, the MRT daily breakdowns, the monstrous traffic jams, the 2,000 container vans that disappeared, the Luneta hostage tragedy, and the collusion between the legislative and executive branch to steal money from the people are but some of what transpired that we will not forget during his term.

  7. “Both story lines are wrong, though they have held sway among investors, experts, and journalists who should know better.”

    Just by the sound of this statement, it is written from emotional impulse not from rational consideration. Mr. Saludo, may I ask three questions? You mean to say “investors” who put their money, not just their words, to the market forces with the hope of substantial return are foolish to make that gamble? You mean to say that these “experts” are also fooled in being swayed to both story lines at the risk their reputation? You mean to say theses “journalists” disregarded their training to report the truth? You mean to say that these”investors”, “experts”, and “journalists” do not “know better” than you?
    Even if the President did not personally put forward the policies of the Bangko Sentral ng Pilipinas and other development from the past action of the government, don’t you think those were continued under his watch.
    The problem here is it taken personally the denial and focus on the President accomplishments during his term, instead on the the general improvement of the Philippine condition even if “only” from the the economic benchmarks. It has become about his person instead of about the government in general.

    • That’s probably due to that person (president) corrupting and now controlling every branch of the government.

      In charge of everything and responsible for nothing.

    • Thank you for your comment and questions, Filipino. I’ll answer the questions, just so my views are clear.

      Question: “You mean to say ‘investors’ who put their money, not just their words, to the market forces with the hope of substantial return are foolish to make that gamble?”

      As the article states, the erroneous thinking is NOT in putting money in the Philippines (nothing wrong in investing in a rapidly growing economy), but in attributing the growth to Aquino’s purported reforms and fearing that the expansion would stall once he goes.

      Question: ” You mean to say that these ‘experts’ are also fooled in being swayed to both story lines at the risk their reputation?”

      If misguided media popularize a wrong narrative, often by ignoring the facts cited in the article, then it actually does no damage to experts’ reputations to parrot the wrong perspective. It takes a truly knowledgeable analyst with solid data and conviction to contradict the prevailing story line.

      Question: “You mean to say these ‘journalists’ disregarded their training to report the truth?”

      The article did not say anything about journalists disregarding their training to report the truth. At the same time, the column implicitly invites journalists, analysts and investors attributing the growth surge mainly to Aquino, and fearing the momentum would end with his term, to consider the facts cited in the story and ask if they support or contradict the prevailing beliefs, and if they show undue emotion or a rational and informed analysis of reality.

      Thank you again.