PH economy to march on despite political risks – Oxford Business Group
MANILA, Philippines – The Philippine economy remains well insulated despite the ongoing crisis in Marawi City and the increased political risk that comes with it, according to global research and consultancy firm Oxford Business Group (OBG).
Investor uncertainty in the new environment has already been voiced out with major credit watchers Standard & Poor's and Moody's both warning of increased political risk under the administration of President Rodrigo Duterte.
Despite the state of martial law in Mindanao, however, OBG noted that the unexpected tide of populism sweeping across the globe is more of a threat to the Philippine economy.
"The bigger issue is geopolitical risk. What's happening with [US President Donald] Trump, China, this global repositioning and realignment is more troubling. Investors have quite a good stomach for regional isolated risks," said Paulius Kuncinas, OBG managing editor for Asia.
"I'm not saying [the increased political risk] is insignificant. People are obviously paying attention but the economy will march on. I think we should pay more attention to geopolitical risks," he added.
Another expatriate, Michael Russell, who is president of the Clark Freeport-based Global Gateway Development Corporation, echoed this sentiment.
"You've seen so many economies throughout ASEAN (Association of Southeast Asian Nations) that have had their own hotspots over the years, but those economies have done incredibly well," Russell said.
"The Philippines has so many macroeconomic and socioeconomic factors that are driving the growth, so I think that's going to be [economic] momentum that's hard to stop," he added.
Ayala Corporation managing director and AC Energy Holdings Incorporated president John Eric Francia also shared what he said was the prevailing view of the business community that recent developments are "just political noise" and "it's business as usual."
The 3 executives were the panelists at the launch of OBG's 2017 annual economic report on the Philippines on Wednesday, June 14.
"The Report: The Philippines 2017" charts the country's long-running growth story, with particularly detailed coverage given to the Duterte administration's major economic moves, such as the proposed tax reform package and efforts to cut red tape as well as attract new investments.
This year's report also contains interviews with the President himself, Finance Secretary Carlos Dominguez III, and other members of the Cabinet.
Handling infrastructure projects
The panelists noted that investors' eyes are firmly on the Philippine government's ambitious infrastructure plan, dubbed "Build, Build, Build," which Francia said is at an important policy crossroads.
The Duterte administration has also said it would fund most projects through Official Development Assistance (ODA) or through the national budget, thus breaking with the established public-private partnership (PPP) scheme used by the previous administration.
"I think the government does have the financial capacity to do that. In my mind that's not an issue," Francia said.
He pointed out that the government's balance sheet is well-equipped for it, "given that the country's debt-to-GDP ratio stands at around 41% compared to Malaysia's 50+%, the US' more than 100%, while Japan is even higher."
But Francia cautioned that the government could be putting too much on its plate in terms of projects.
"I think the bigger issue is the organizational capacity and capability of government to carry out all of these large and complex infrastructure projects. It's not easy," he said.
"The government has put forward a lot of big, ambitious projects, whether rail-related or airport-related or roads. On top of that, they are also entertaining unsolicited bids. That also requires some real organizational capacity. So how do you do all that?" he added.
"My hope is that they make some hard choices early on to prioritize and recognize that we do have limited resources that should be channeled in a focused manner so that we get to execution fast." – Rappler.com
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