‘BUSINESS AS USUAL’
A business leader in Cebu yesterday called for sobriety on reacting to reports about foreign investors being unnerved by the uncertainty brought about by President Rodrigo Duterte’s bloody anti-drug war and his foul-mouthed outbursts in defense of the campaign.
“As we all know in the local scenario, it’s still business as usual. In fact, more investments are actually coming into Cebu and the country, said Glenn Soco, Mandaue Chamber of Commerce and Industry president in a text message to Cebu Daily News.
“We have to be optimistic and cannot be too alarmed over these negative statements and some movement in the market because it has always been volatile to begin with,” said Soco, who also pointed out that Duterte’s administration was not even 100 days in office yet.
“All of these negative comments are just mere speculations and sentiments,” said Soco.
He cited the economic fundamentals and the promise of Duterte administration’s 10-point socioeconomic agenda as a means for the country to grow.
“We need to focus on the economic fundamentals which have always remained strong. So as long as the present administration fulfills its 10-point socioeconomic agenda and its promise to improve the peace and order situation in the country, we will rise above the challenges and grow faster as a country,” Soco said.
The 10-point socioeconomic agenda of the Duterte government included maintaining the current macroeconomic — fiscal, monetary and trade — policies.
It also included instituting progressive tax reforms and more effective tax collection; increasing competitiveness and the ease of doing business, as well as relaxing the restrictions on foreign ownership, except with regards land ownership; accelerating the annual infrastructure spending, with public-private partnerships playing a key role; and promoting rural development via agricultural and rural enterprise and tourism.
The agenda also called for ensuring security of land tenure to encourage investments and address bottlenecks in land management and titling agencies; investing in human capital development, including health and education systems; and promoting science, technology and the creative arts to enhance innovation and creative capacity towards self-sustaining and inclusive development.
The Board of Investments, in its second quarter report last August, reported that investors continue to pour their money in Cebu with P17.7-billion investments for the second quarter of the year.
The BOI said that five of those investments are mass housing projects.
National Economic Development Authority-Central Visayas (Neda-7) Director Efren Carreon was likewise optimistic about the continued growth of Cebu’s economy, pointing to big-ticket projects such as the proposed new Cebu International Port project worth P9.13 billion in Barangay Tayud of Consolacion town in northern Cebu.
Carreon said he expected the Neda Board, headed by President Duterte, to approve the project by the end of the year.
Philexport Executive Director Federico Escalona, on the other hand, told CDN there was nothing that could be done to change the foreign communities’ negative perception of the country, unless the Philippines embarks on an international public relations campaign.
Escalona, however, found it “so unfair for the international press to accuse the President without them coming over to investigate the veracity of these so called (rights) violations.”
Edilberto Mendoza, president of the Cebu Association of Tour Operators, echoed a similar sentiment.
“I personally do not think that investors do not want to invest here just because the President is foul mouthed and is engaging in a bloody war against drug lords. Here is a President who is working and doing the best that he can to eradicate drugs and criminality in the country. It should be a positive signal to investors and not the other way around,” he said.
Uncertainty is not good for business
According to a report by the Associated Press, analysts and businessmen point to uncertainties about Duterte’s policies and flip-flopping pronouncements as largely to blame for foreign selling in the stock market and the peso’s plunge to a seven-year low, reversing the initial optimism after his June 30 inauguration.
Some experts say unpredictability is slowing longer-term foreign investment in the Philippines. Photos and reports in the media of killings of suspected drug dealers and users — more than 3,000 since July 1 — have contributed to sagging confidence. “We can all deal with risks. We can put measures in place to provide for risks,” said Guenter Taus, the head of the European Chamber of Commerce in the Philippines. “But uncertainty is a factor that we do not like in business, and that is exactly what we’re experiencing right now because we don’t know where we are heading.”
Taus said several companies that had intended to establish operations to the Philippines now prefer to wait and see what happens under Duterte. He declined to say which companies had changed their plans.
He said investors unsure about the Philippines may choose to look at other Southeast Asian countries to gain access to the region’s common market of more than 600 million people.
The American Chamber of Commerce of the Philippines said in September that while the country’s economic fundamentals are strong and its potential high, there is growing concern that Duterte’s policies and behavior could affect long-standing optimism by American businesses in the Philippines.
The chamber said that the large number of deaths in the anti-drug campaign is harming the Philippines’ image, and that some investors are asking if the drug war “reduces the rule of law.”
“In addition, traditionally excellent bilateral relations between the U.S. and the Philippines have recently been strained by language from Philippine leaders,” the chamber said.
Last month, before heading to the Asean summit in Laos where he had been scheduled to meet with President Barack Obama, Duterte used the Tagalog equivalent for “son of a b****” as he told Philippine reporters he wouldn’t accept questions from Obama about extrajudicial killings that have occurred during the drug crackdown. Obama canceled the meeting.
After the European Parliament recently called for an end to the drug killings and expressed concern over the scale of deaths, Duterte hit back with a profane insult and raised a fist with his middle finger thrust out. And this week, Duterte said US-Philippine joint military exercises end this year, though his foreign minister said later that they will continue until 2017 as previously agreed.
President Duterte also started to chart a foreign policy that is not dependent on the US, and has taken steps to bolster relations with Russia and revive ties with China that had been strained under his predecessor, Benigno Aquino III, over territorial conflicts.
He said he won’t allow government forces to conduct joint patrols of disputed waters near the South China Sea with foreign powers, apparently scrapping a deal Aquino reached with the US military earlier this year. Duterte has also said he wants US forces out of the southern Philippines, saying minority Muslims there resent the presence of American troops.
All of this has raised concerns about a Philippine economy that grew seven percent in the second quarter and 6.9 percent over the first half of the year compared to the same periods last year — among the fastest rates in the region.
The credit-rating agency S&P Global warned Sept. 20 that the stability and predictability of policy making in the Philippines “has diminished somewhat under the new presidency.” It kept the country’s credit rating at investment grade, with a stable outlook, but said that rating was unlikely to rise over the next two years.
Last Monday, the peso hit its lowest level against the dollar since September 2009. It fell further Friday, closing at P48.50 per US Dollar.
Central bank Deputy Gov. Diwa Guinigundo said foreign direct investment continues to grow. It stood at $4 billion for January to June this year compared to $2.2 billion for the same period a year ago.
“As far as fundamentals are concerned, I think they are outstanding fundamentals, but then the sentiment is something else,” he told reporters late Wednesday on the sidelines of an economic forum. Sentiment is driven by both external and domestic factors, and it’s difficult to attribute negative sentiment to a specific factor like Duterte’s statements, he added.
Guinigundo said the government’s economic program follows the broad strokes that have produced 70 quarters of economic growth, low and stable inflation and a healthy banking system. “And yet the stock market is dropping and the exchange rate is moving consecutively down such as we are now the worst-performing currency in the region,” he said.
Budget Secretary Benjamin Diokno said Wednesday that the depreciation of the peso is a result of the strengthening of the dollar more than the weakening of the local currency, and should not be a cause for concern.
But Joey Cuyegkeng, ING Bank’s senior economist in Manila, said the peso was the only Asian currency that slid in the third week of September, despite favorable economic reports, including an increased balance of payment surplus in August.
Presidential spokesman Martin Andanar said that the fundamentals of the economy are solid and strong, and that the anti-drug campaign will enhance the Philippines’ image to attract more foreign investment.
In a speech to troops the day after the S&P Global warning was released, Duterte shrugged off the agency’s remarks. He said if business and the economy are affected, “so be it.”
“Get out, then we start on our own,” he said, apparently referring to Western investors. “I can go to China. I can go to Russia. I had a talk with them. They are waiting for me. So what the hell.”/ with reports from AP
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