The Philippine economy sliced and diced: are we being misled?

By Chemrock

A group of Duterte’s economists and a group of anti-Duterte economists are arguing with each other from their office windows on different sides of the street.  Never the twain shall meet because they are arguing from different premises.

We all want the best for the Philippines, so the questions that economic data raise need to be seriously understood. The admin’s economic team has their narratives, which I would like to believe are not politically tainted, but fair economic assessments from studied-minds. However, economics is not exactly a science, and all opinions are open to debates. It is in this light that I write, a non-economics guy with an open mind.

With apologies for the length. I thought of splitting into two parts, but decided it’s better to keep everything in one place. The Librarian would appreciate that.

 

PESO EXCHANGE RATE :

Budget Secretary Diokno : The depreciation of the peso is a result of the strengthening of the dollar more than the weakening of the peso

This has to rank very high in a list of economists’ jokes. Hey you’re not rich because you are poor. What a revelation.


During the Pnoy years, the Peso fared extremely well against the dollar. With the exception of SGD, which appreciated against the USD, the Peso lost only 1.35% whilst the other Asean countries lost ground substantially. The reason was Pnoy nurtured the tiger economy and politics was relatively stable. 16 months under the current admin, the peso is last in class. Whilst external factors do play an important role in a currency’s strength, this table throws out the window the admin’s lame excuse that peso depreciation lately has been due to the strengthening of the $.

Trade Secretary Lopez : It (peso weakening) spurs economic activity, like more purchases, as we’ve experienced a consumer spending uptrend whenever there is a depreciation.

Budget Secretary Diokno : So the net gain will be P9.2 billion in additional revenues minus P2 billion in higher debt service, [which gives us] P7.2 billion

Treasury Secretary Domiguez : A one-peso depreciation means there is P50 billion more of potential demand.

If they are all correct and we are all wrong, then Venezuela and Zimbabwe would be financial paradises today. Oh wait a minute, in terms of their local currencies, most of the people in these two countries are millionaires actually.

Will a country gain or lose when its currency strengthens or depreciates? The right answer is “DEPENDS”! Generally, a country with an export-led industrialization program benefits as its goods become cheaper to other countries, so exports improve. But whether a country can benefit at this stage depends on lots of other factors such as — are the goods in demand in the market, the price elasticity of the products, do artificial trade barriers prevent entry of the products (the European GSP that this admin doesn’t want, remember?). You may love bananas, but if the price drops by 50% it doesn’t mean you will gorge on 20 bananas a day!

The benefit to exporters from a cheaper peso is a short-term effect. All things being equal, a weaker currency pushes up inflation and, over time, cost of production goes up (because we import materials with more pesos) and with it the country’s products then become less competitive. There is empirical evidence. What we want is price stability over the longer term.

On a day-to-day basis, the peso rate fluctuates due to supply and demand. If there is a longer term trend line, whether up or down, it is cause for concern. The huge drop during the current admin does not point to normal supply and demand influence but is indicative of more serious weaknesses. In the few weeks that foreign investors pulled out of the PSE, or the quarter where the imports far exceeded exports, yes there would have been some pressure on the peso. However, this should have smoothed out again after that and be back to the rate of 46s level, but it’s not.

The admin’s narrative has consistently been the peso weakness is due to supply and demand (we are importing more) and dollar strengthening (due to US rate hikes). That’s the economists’ view. Those with financial market world views might see differently. Foreign exchange transactions arising from trade-based activities actually form a very minor part in the country’s FX volume. The FX market is a gargantuan market (more than $5 trillion daily worldwide). Although the peso market is tiny by world standards, nevertheless at about $700 million daily, it by far dwarfs the trade figures. Where are all these huge figures coming from if not from trade demands? The people who are actually driving the FX market are the currency traders, investors and people hedging their portfolios. So what’s influencing these market participants to drive the peso rate up or down? What’s at play are not just supply and demand, but more importantly, political stability and market sentiment. In a floating rate regime, the market drives the rates. And the market is seldom wrong. As long as key economic leaders bury their heads in the sand, Houston, we have a problem. In the financial crisis of 1997, economic leaders of Malaysia, Thailand and Indonesia were ostriches until financial predators like George Soros pulled their heads out of the sand.

Diokno : I’m not worried about the peso depreciating

As at Jun 2017, the total external debt was $72.5B. This is the total of public and private debt to foreigners and the split is about 50/50. Of the $72.5B about 70% is in US$ and the rest in other currencies. Let’s just assume they are all in $. The $/PHP rate then was 50.4657. (Currently about 51.2800). In FX trading lingo, the last digit of the 4 decimal places (7 in the 50.4657) is known as the pip. Traders monitor their profit & loss by movements in the pips. For our example here, the external debt of $72.5B, every one pip up means a paper loss of about $1.8M to the country. This will play itself out in higher debt servicing in terms of local currency as well as translate to lower taxes (which the economic leaders didn’t input in their happy-happy computation).

 

FOREIGN RESERVES 

The Philippines has one of the strongest foreign reserves in the world. The Pnoy admin passed on to the current admin a reserve of $84.5B representing about 10 months of the country’s imports. At the end of Jun 2017, it stood at $81.3B, down but still very strong. In a fiat currency regime, foreign reserves of a country play a very important psychological role of backing the local currency’s value. Should this run too low, the currency will depreciate substantially.

On a day-to-day basis, the central bank uses the foreign reserves for their market intervention activities to keep the peso within certain bands. It is not known how much Bangko Sentral has intervened in the market which may have prevented the peso from slipping further. It was observed that the central bank indeed intervened heavily in the month of June. In interim financial reports, it is difficult to see where FX losses are carried in profit & loss or hidden in general reserves. Thus, we can’t quantify the losses arising from such interventions to protect the peso. But no doubt, this has contributed to the reduction in the foreign reserves.

The peso rate is expected to slip further so we can expect further central bank intervention with repercussions on the foreign reserves level. Protecting the peso in short-term day-to-day movements using the foreign reserves are routine, but intervening in a market with a trending long-term weakness will have disastrous outcomes. Once the foreign reserve balance drops below a certain level, a psychological sentiment is breached and it’s downhill very fast. Malaysia, Thailand and Indonesia can testify how fast their reserves vanished under those circumstances in 1997.

During sudden currency attacks on a country, such as the 1997 Asian financial crisis, a country will run out of foreign currencies very fast and be at the mercy of predatory currency traders. After the 1997 lessons, central banks arranged multi and bilateral arrangements for currency swaps. The Chiangmai Agreement is one such arrangement of which the Philippines is a signatory. This helps a country under attack to draw on badly needed foreign currencies to maintain liquidity for their financial market, without the need to deplete the foreign currency reserves of the central bank. Thus preventing a repeat of 1997. The trouble is, many central banks are mis-using these swap arrangements for routine market intervention operations. So the question to ask is, is Bangko Sentral drawing on these swap arrangements to prop up the peso, thus preventing losses in defending the currency from being apparent in more significant depletion of the foreign reserves?

I should point out that some central banks do not revalue their gold reserves and some do. The US does not. Bangko Sentral revalues the gold reserves. How much of this revaluation has impact on the foreign reserves and distorts a better understanding of the country’s financial standing is anybody’s guess.

 

CURRENT ACCOUNT DEFICITS 

NEDA Secretary Pernia (Chief Economist) : Philippines’s robust service exports helped contribute to the country’s positive external current accounts.

Oops that was in May 2017.

I just want to touch on 3 significant points here.

1. The current account deficits in the last 6 months 2016 and first 6 months 2017 under Duterte admin.

The deficit in 2016 Q4 was in fact pretty high at $1B. The shock impact of being the admin to register the first quarterly current account deficit in decades certainly provided ammunition to the anti-Duterte crowd. And who can blame them? Are we to be unduly worried about this deficit? The answer is no, not at this stage, for 2 reasons.

(a) Balance of payments data are published quarterly and aggregate monthly info is displayed. The fact is BOP data are collected on cash basis (not on accounting accrual basis), so wild monthly gyrations are to be expected. There have been months in the past admins where the current accounts reported deficits, but it average out in quarterly reports.

(b) The deficits were not due to a drop in exports (which should be worrisome) but an increase in imports.

What is more important is the trend line. If the deficits persist over a few more quarters, then yes, sound the red alert. And why should we be concerned with a persistent current accounts deficit? That’s because a deficit in the current account of our Balance of Payments mean foreigners have more claims on the Philippines than we have on them. It plays on investor confidence and thus has an impact on the peso, which is already evident. Over the long run, a persistent deficit means the country needs to resort to foreign loans to fix the deficits (the only exception is the US, which is another story).

2. The increase in imports.

This is indeed the main reason why we went into deficits. Both Dominguez and Diokno offered the intertemporal economics view, which basically says there is a time lag in cause and effects, consumption now has future returns. The increase in imports is in capital goods as corporates gear up for the huge infra projects coming on stream. This investment will generate growth and returns later on. It’s normal for an economy in an expansionary phase. That’s the official view of the admin. By the way, nothing wrong with this thinking, it’s classic economist’s speech, goes well with a glass of wine

I have neither the time nor the capability to do big data analysis, so I’ll just accept the fact the imports are in fact for capital goods. There is no reason to suspect otherwise. However, the view that capital importation is due to confidence in the build build build brouhaha is questionable. Here’s why :

  • None of the infras has yet been finalized. Who are the brave corporates to execute their capex program before securing any projects? Do they know something others do not know?
  • Capex are normally planned way in advance, so the increase in capital goods imports would be due to investment decisions made long ago.
  • From Jul 2016 to Jun 2017, imports increased by $20B over 12 month averages. That’s a huge figure that the build build build confidence reasoning cannot support. Part of the cause is undeniably due to the depreciation of the peso — our imports are getting more expensive. That’s the new normal of which the admin doesn’t compute. However it cannot fully account for the $20B. I think the answer may lie in examining the spike in the FDI in 2016 Dec- 2017 Jan period. It may be industry-specific related.
  • Business confidence isn’t as rosy as what the admin want to believe. Here’s the Bangko Sengtral Business Confidence Index. The confidence level is obviously down.

3. Increase in OFW remittances.

In the first 6 months 2017, OFW remittances increased 11% over the preceding 6 months (about $1.7B).  This significantly cushioned the current accounts deficits. The deficits could have been much worse. It is also a reflection this admin is a push factor for more dis-enchanted Filipinos leaving the country in search of better jobs overseas.

 

FOREIGN DIRECT INVESTMENTS

Some say it’s up, some say it’s down. And both are correct!

Depends on when you are looking. And which period is being compared to. Once again, it should not be viewed on the basis of quarterly reports but over a longer period.

The 10 year FDI chart shows a consistent pattern. There is always a spike at the end and beginning of the year when capex commitments are realized. It is still too early to form any opinion as these FDI flows are commitments made several years earlier. What has been reported is that pledges have dwindled and so projections of this chart into the future is not likely to look pretty. Investments plans have been put on the back burners. This is the 91% cut-back in FDIs mentioned in Joe’s previous economy article. This is going to hurt not just job creation, but even the Balance of Payments due to drying up of funds inflow. Why do we think a hastily assembled economic team was sent to the USA recently? These are serious matters, folks.

 

PHILIPPINE STOCK EXCHANGE

Looking at the PSEI chart we can see the economic euphoria of the Pnoy years that saw the index consistently moving up and hitting all-time highs. It gained by almost 200%. The election year 2016 saw a dip due mostly to foreign funds reacting to Fed rate hikes. Projecting forward the chartists see the tripple top breakout and tripple bottom resistance levels pointing up, indicating possibility of the market continue to new heights. Is the market on a runaway train or is it because investors are confident of the economic policies of the Duterte admin?

I see two explanations for this. One is that PSE is behaving like all stock exchanges in the world today. Decades of high liquidity and cheap money have seen equities grossly over-valued and indexes defying the gravity of low performing economies. No doubt the positivities of the Pnoy years added to the confidence of the market. Whilst the Philippines 6+ % GDP growth is pretty good, it is in no way comparable to the double-digit growth rates of China and the Tigers of years ago. The other more likely reason is that the PSE is really too small a market. It’s daily turnover is only about Php 10B, even smaller than late comer Vietnam. So the continued run up in the PSE bears no co-relation to the economy. According to broker records, 30% of active accounts are foreign holders. The majority of these have moved their funds out. So the market is mostly local plays. With high liquidity, why put money in banks to earn under 1% returns. It’s the casinos or the PSE. Basically it’s too much money chasing too few stocks.

Because the market is small, the performance of the PSE is not a good barometer of the economic health of the country when looking at small window time frame.

 

CREDIT RATINGS 

President Duterte : “Tapos sabihin nitong mga BB plus, credit. Wala akong pakialam sa inyo [And they raise this BB plus, credit. I don’t care about you],”

In plain English — the president is not bothered by international credit ratings. He thinks it’s trash. Its utility is over-hyped.

The president of the country doesn’t get it. International credit ratings are extremely important. Pnoy admin had brought the country’s credit rating from ‘junk’ to ‘investment’ grade. With investment grade, Pnoy admin was able to take advantage of the low-interest rate era to refinance government debt. With the resultant huge savings on debt servicing, Pnoy was able to expand social services without raising taxes . . .  but few really understand this. The country owes great gratitude to Pnoy, but many, like President Duterte, just don’t get it. The epistemic limitation is mind-boggling.

In Jan 2017, the govt raised $2B 25 year bonds ($500M new loans and another $1.5B to refinance existing debts). This was a very successful sovereign issue that was over-subscribed and the rates were razor-thin. Diokno unabashedly proclaimed it was international investor confidence with the leadership of President Duterte. It was his polite way of saying the Philippine credit rating meant a lot and thanks to Pnoy for bringing the country to investment grade level (the first time ever in 50 years!)..

Don’t take my word for it. Refer back to the FDI and PSEI chars. The spikes in 2013 were registered right after Fitch upgraded Philippines to investment grade.

Good country credit rating is not only just good for government borrowing. It also makes it cheaper and easier for private corporations when they go to the international financial markets. It also makes for bigger correspondent banking lines that international banks extend to Philippines banks. There is no way to quantify this, but it wouldn’t be off the mark to say that just one grade down in the rating means hundreds of millions of $ wiped off valuations of investor books, plus making it more difficult and expensive for both the government and private enterprises to go to the international financial markets.

 

FOREIGN DEBT 

Sometime in May 2017, the South China Morning Post carried an article by a contributor. It obviously worried lots of folks and created a stir in socmed. I never did see anyone debunking that piece of work. It was flawed in many aspects. Just to mention a few :

  • It premised on an immediate drawdown of the loans, which won’t happen. In fact, many projects will continue long after Duterte’s term.
  • Interest was based on monthly compounding which is terrifying, and definitely not the basis for such international loans.
  • It overlooked ongoing loan servicing and repayments.

I was surprised SCMP accepted that article. It was trash.

The last I know, the golden infras call for 8.4T pesos ($160B) of loans. So this debt has two portions — what is borrowed from citizens and local corporations (domestic or internal debt) and what is borrowed from foreigners (external debt). Diokno has consistently stressed that the govt will borrow 80/20 (domestic/external). So it would be 6.2T pesos domestic debt and 2.2T pesos ($112.2B) external debt. If this is strictly adhered to, we are less exposed to the vicissitudes of external influences.

In 2017, the Treasury issued 100B pesos of retail Treasury Bills. They are poised to issue another 30B pesos this year. Since golden infras has yet to commence, we can presume these TBs will be used to finance the deficit budgets of 2017 and 2018. They are presently considering a “Rebuild Marawi” bond. Sometime back I wrote about watching out for the Treasury build up of balance sheet liabilities. It’s happening. For the golden infras, another 6.2T peso issues are on the way. Question is, is there so much liquidity in the market? And if so much domestic savings are sucked up into the golden infras, will there still be sufficient liquidity for the domestic market?

The servicing of that huge internal debt will see no loss of resources to the country. It’s just a redistribution of wealth, from tax payers to owners of capital. But it has great impact across many socio-economic dimensions. Take for example, given that domestic debts may be in the form of retail Treasury bonds, then we can assume most holders will be the older generation. So one socio-economic dimension is the redistribution of wealth from the younger generation to the older generation. With a huge 6.2T pesos domestic debt, the micro disturbances need to be studied and managed.

Diokno : Borrow now for infra development while rates are low

As for the external debts, another $112.2B will be added to the current $35B making a total of $135B, that’s what the government will end up owing to foreigners. Obviously, when it comes to loans, we worry about the rates. Many have been critical about the Chinese loan rates of 5-6% taken by other countries. Actually this criticism is unfair because we don’t really know the terms. If it’s 6%p.a. fixed for 25 years, it’s pretty cheap. It’s all about short term vs long term risks.

Diokno was referring to the era of cheap loans. Decades of quantitative easing by almost all the advanced economies have created an era of liquidity that pushed rates to incredible lows. At some point, negative rates were experienced. If you have good projects and are able to service the debts, of course it is a good time to borrow. But it is only normally in ODAs that borrowers can lock in the rates for 25 years. International commercial loans would tend to be on floating rates with 3 or 6 month refixes. Perhaps Diokno has a more positive take on the yield curve, but indications are the gravy train has left town. Just recently the Fed and European Central Bank has put the market on notice that they are on the path of upward revision of rates. No, Mr Duterte, they are not manipulating the $. Just the usual reaction to lower unemployment and higher inflation figures. Markets are already reacting. Bond holders are shedding inventory in expectation of rates rising.

A nation scared by Marcos’ ill-disciplined build up of a mountain of debt, part of which is still being serviced today, is understandably very sensitive to an admin that is pushing for unprecedented numbers of infrastructure projects financed by loans. That doesn’t mean we should be overly risk averse and nothing gets done. When it comes to infras, the key should be twofold. Firstly, the quantum of the loan should be supportable by the GDP. Secondly, the projects themselves should be able to generate economic value. Sure, the infras projects will create jobs during its currency, but it’s what happens after completion that’s more important. For example, the billions that will be spent on the subway system in Manila. It’s all positive for commuters, plus the abstract economic losses due to delays will be avoided. But does this spur economic activities? I agree the state of public transportation is very bad at the moment, but I feel infras should prioritize on projects that immediately and directly drive economic activities NOW and are engines of further growth. Arroyo’s economic zones were very good ideas, unfortunately it was all talk.

 

REMITTANCES OF OFWS

Year on year aggregate remittances from OFWs continue to rise. Off the top of my mind, I think it is now $9B annually. There is no other country in the world where the miserable poor are the ones who are propping up the country the way it is in Philippines. Whilst I applaud the OFWs for the sacrifices they make to put food on the table for their families, the OFW remittances figure in the BOP is not something for national pride. Yet year in year out we hear central bankers and key economic leaders speak of the growth data in remittances with great sense of national achievement. Shame on them I say.

Local economic gurus speak of the importance of these remittances to the economy and its contribution to the GDP. Lets look at the micro-economics and see if this statement is true. This is important, because policies flow from economic views. Get one wrong, you end up with two wrongs.

The big chunk of OFW remittances go to families who depend on these for their basic needs — food, medical, rent etc. This does nothing to the GDP. But it helps the government tremendously because it stabilizes macroeconomics, thus freeing tremendous resources for other uses. A further slice of the remittances go to buy land or houses. Again, this does nothing to the GDP. Only a small slice gets channeled to investments that promote future growth –  basically education and setting up sari sari stalls, restaurants, other small shops, etc.

Remittances present a moral hazard – it nurtures a mendicancy culture. My daughter is sending 20K pesos back every month, there is no need for me to work so hard. I can splash on San Miguel lites, the wifey gonna remit tomorrow. This is a harsh reality.  Unfortunately, this is a societal problem and there is nothing much the government can do about it. But of course there are good success stories too of families clawing out of poverty because of remittances.

The true great benefits that OFW remittances gift the nation are :

  • It gave the government the time and space to manage its macroeconomics. A poor country has no choice but to send their citizens out to service other richer countries. We assume Philippines see this as a temporal situation as it would want to create an economic environment where its citizens can thrive in the homeland. Unfortunately, one generation has been lost. The respite that OFW remittances gave the country has been squandered by political leaderships bereft of capability to steer the economy as they pander to personal interests.
  • The huge OFW remittances are what’s been keeping the Philippines afloat for the last 50 years. It’s greatest contribution lies in its prominence in the country’s Balance of Payments. Without this, the Philippines would have been having Current Account deficits for the last 50 years, a perpetual Current Accounts deficit. The country would have been forced to borrowing every year for 50 years to fix the deficits. It would have resorted to selling every national asset it has to pay for these deficits,  including the statue of Rizal standing in Luneta Park.

The admin has now ‘hijacked’ the Post Office Savings Bank as the institution to channel OFW funds toward some economic activities, giving OFWs the opportunity to invest their money. The general idea is a worthy one, but details are not yet forth-coming. Let’s just hope that it’s not another common scenario of appointees turning fat-cats skimming and plotting self-interests at the expense of OFWs.

Thanks for reading. It’s  lengthy so I’ll dispense with a conclusion. I see those economists are still arguing at their windows.

 

Comments
176 Responses to “The Philippine economy sliced and diced: are we being misled?”
  1. karlgarcia says:

    Thank you for keeping it in one place.

  2. karlgarcia says:

    The exchange rate could have done wonders if there are remittances.
    According to the grab driver I rode in, who just came home from Jeddah, the new taxes imposed(against koran) will hit the remittances.

    We still have Saudi as number two to US in terms of remittances. Harder times ahead.

  3. Killing the goose that lays the golden egg comes to mind.

    Let us party away the Christmas bonus, to hell with the future. Happy happy!

    Marcos did it, but not so fast, while the one who thinks and acts like a tricycle driver has seen the Aquino boom and probably thinks that will run by itself, happy happy for my clique and me. Will this end up with the country in front of Sokor around 1960 behind Laos, more like Zimbabwe one day?

    • karlgarcia says:

      Wil sells insurance.
      The typical package comes with an investment option, but it looks more like the insurance is the option because you invest and if something happens to you you will get 125 percent. meaning 25 percent of investments.

      It is very expensive so they find ways to make it affordable and banks are now having insurance as an incentive to encourage depositors.

      But it is still a hard sell, but they find ways.

      The article you linked had the observation of young consuming beer and coffee because they have no family to support, I don’t think it is accurate.
      Even with those with families spend heavily on beer and coffee.
      If call centers close shop, beer and coffee will still be there, it will just be a new to be named industry that will drive consumption.

  4. Sup says:

    Great read , salamat…Problem is how to explain to the ”tricycle driver” at the corner of the barangay hall……?

    • chemrock says:

      Thanks Sup. That’s why ideas guys are branded non-inclusive. It can’t explain some stuff, but would’nt it be great all those money spent on drug war be spent sending the tricycle driver to school? Wealth = investment (education) = growth.

      • Sup says:

        Correct Po.

      • Mary Grace P. Gonzales says:

        That’s the main purpose of the 4Ps. Assisted education for the poor – there are free public schools up to grade 12 level… the 4Ps make it possible for those poor folks to regularly go to those free educational institutions, maintain the health of the students and the mothers. Free education and health – yes… Wealth = investment (education) = growth.

        • chemrock says:

          Hey Mary Grace
          You are into those health stuff. Here’s something useful.

          Once when I was young I had a piles or that dread name haemorrhoids, and it was bleeding bad. I happened to be at my moms place and she inquired why I was sitting funny. When she knew my problem she said hold it, don’t go home just yet. She hurried down to the road side and started pulling some grass which she concocted a brew for me. I took it rather unwillingly, but lo and behold next day the bleeding stopped and the piles was gone in another day or so.

          Never knew what she pulled off the roadside, but I saw it was some kind of ordinary grass.

          Then few of days ago, here in Spore, I bumped into a couple of Filipinos pulling stuff off the roadside. I knew immediately what they were up to so I approached them. Sure enough they were pulling the same grass. They said they learnt of the stufflong ago from a kabayan who married a Taiwanese guy. They told me it’s great for more ailments other than piles, such as anti-inflammatory and kidey cleansing, etc.

          So now I got a name for the grass. Its PARAGIS. But be careful, there is another specie that looks quite similar to it.

  5. karlgarcia says:

    I posted this before.
    Those pledges may be for naught, because in the end it is the signature of Duterte that matters.

    http://www.philstar.com/business/2017/10/23/1751360/delays-ecozone-approvals-derail-p500-b-investments

    With his action man facade hitting a wall, he now sees that it is not easy.

    • karlgarcia says:

      Goodbye Philippines, good morning Vietnam!
      ———-
      Delays in ecozone approvals derail P500 B investments | Business, News, The Philippine Star | philstar.com

      MANILA, Philippines — The country risks losing some P500 billion worth of investments due to the persistent delays in the proclamation of new economic zones, the Philippine Economic Zone Authority (PEZA) said.

      PEZA director general Charito Plaza said out of 58 economic zones pending presidential proclamation, only six have been released as of Oct. 10. These include one horizontal economic zone in Negros and five buildings that will house IT-business process management firms.

      “We computed the initial investment of this delay. It amounts to P500 billion. This includes already the industries because these industries cannot put up their facilities if their site or building is not yet proclaimed,” Plaza said.

      “So if these investors will change their minds, we will be losing these opportunities because they are already here. Some of these investors are telling me their principals are already telling them to look or transfer in Vietnam,” she added.

      Plaza earlier aired her frustration over the delays on the proclamation of new economic zones that have resulted in applications piling up at the Office of the President.

      She said out of 46 proposed economic zones pending presidential proclamation then, six were from the time of former president Benigno Aquino III and the rest during the current administration.

      Business ( Article MRec ), pagematch: 1, sectionmatch: 1
      After going public about the issue, Plaza said Special Assistant to the President Bong Go has initiated a meeting with the legal teams of the Office of the Executive Secretary, Presidential Management Staff and PEZA to trace the reasons for the delay.

      “They discussed how to hasten the presidential proclamation. What the Office of the President demanded is for the land to be included for the proclamation for the vertical ecozones, as compared to the current practice in which it’s only the building that we proclaim. PEZA board immediately approved it,” Plaza said.

      Plaza said she is hoping there would be a drastic improvement in the proclamations in the coming months.

      “PEZA wishes that all those pending ecozones be proclaimed so investors can start building, because they have waited very long already,” she said.

      The Philippine Chamber of Commerce and Industry (PCCI), the country’s largest business organization, has also urged the government to fasttrack the presidential proclamation of economic zone applications already approved by PEZA as these has caused some investors to hold back on their planned investments.

      The PCCI included the resolution on the economic zone proclamation in the 10 recommendations the group submitted to President Duterte at the close of the 43rd Philippine Business Conference last Thursday.

      • Chris Albert says:

        I pulled out of a PEZA application, however the reason wasn’t slow approval it was the political climate. The current admin is not giving enough stability or trust, and I could not get Hermes (Euler) security for the investment anymore. The new form of giving the land will lead to a partial sell out of the nation as the likes of tourist projects, casinos and a few PPP’s will go ahead the rest stalled already.

        • karlgarcia says:

          Thanks for the first hand account, Chris.

        • madlanglupa says:

          > the likes of tourist projects, casinos and a few PPP’s

          Yeah, they’re angling to grab the Chinese Mainlander market, especially the uppity ones who like to splurge.

          • Haha! There is ‘up market’ and ‘uppity market’. Made me chuckle in me coffee.

          • karlgarcia says:

            The up one percenters market are shrinking, only the uppity remains.

            Too much corporate debt.

            https://www.bloomberg.com/news/articles/2017-10-15/china-s-zhou-warns-corporate-debt-too-high-urges-fiscal-reform

            Too much poverty. The 99 percenters.

            https://worldview.stratfor.com/weekly/recognizing-end-chinese-economic-miracle

            “The second thing to bear in mind is the overwhelming poverty of China, where 900 million people have an annual per capita income around the same level as Guatemala, Georgia, Indonesia or Mongolia ($3,000-$3,500 a year), while around 500 million of those have an annual per capita income around the same level as India, Nicaragua, Ghana, Uzbekistan or Nigeria ($1,500-$1,700). China’s overall per capita GDP is around the same level as the Dominican Republic, Serbia, Thailand or Jamaica. Stimulating an economy where more than a billion people live in deep poverty is impossible. Economic stimulus makes sense when products can be sold to the public. But the vast majority of Chinese cannot afford the products produced in China, and therefore, stimulus will not increase consumption of those products. As important, stimulating demand so that inefficient factories can sell products is not only inflationary, it is suicidal. The task is to increase consumption, not to subsidize inefficiency.”

            • karlgarcia says:

              Erap’s approved reclamation projects for the Chinese and the economic zones in Pangasinan(again for the Chinese) are pipe dreams, if I am to believe what I just linked.
              Unless the one percenters remain trillionaires and not become millionaires.

            • madlanglupa says:

              And the Xi regime is trying to cover that up by emphasizing military strength and extensive use of propaganda operations, to create that illusion of invincibility.

              Yes, the wealth gap is disturbing, and any more would be once again the revolt of the peasants, where history could repeat itself.

            • NHerrera says:

              A DIVERGENT THOUGHT

              China: plenty of poor, conceded. But plenty of powerful non-poor who if the latter can keep the poor fenced-in and working in their places; with the present country stock of wealth and rising, is really a formidable force. No thanks to Trump.

            • NHerrera says:

              Karl,

              The second link is an article of George Friedman dated July 23, 2017. He writes, among others, that China’s regime of 7% GDP growth or lower would be the rule going forward. For my information, I googled and charted the numbers from 1977 to 2016 — a period of 40 years. Except for the years 1981, 1989 and 1990, the growth rate is higher than 6%. The arithmetic average of the growth rate from 1977 to 2010 is indeed a spectacular 9.94%.

              I take it that aside from Friedman and other Western analysts, even Chinese analysts admit that the growth rate of 10% is over. That a number hovering around 7% or lower is something to be expected going forward.

  6. stug1956 says:

    Thank you. I was an fx trader. If I were still in the job the Peso would have been a big sell. I’m glad I’m not and I’m retired cuz I don’t beleive in beating a dying horse. The only trade about the Philippines I care about today is this: 13,000 deaths (more..seeming aura of peace and order) = the depreciation of the Peso (investor sentiment to a bad weather system approaching). While I don’t support Duterte ( personal reasons too) as a former student of economics it drives me to appreciate what it is that his supporters, support. And i have to admit after hearing him talk and curse and rally his crowd with sex filled jokes, his economic message is non existent. And I’m not been trained to give leaders the benefit of doubt. I’m sorry.

    Thank u chemrock, Irineo and joe america

  7. NHerrera says:

    An informative read on the PH economy. Thanks.

    I am wondering:

    1. Computer capabilities have grown in speed, memory and storage capacities such that it has aided much the forecasting of weather and researches in climate change — otherwise not possible or limited in accuracy in the days of very limited computer capabilities.

    2. Economic studies have shown the relationships of economic variables. We have many of these blocks or pockets of relationships known to be true or hold reasonably well. There are also feedback loops among them.

    3. Now because of the computer capabilities, I ask if there are researches done to combine, consolidate or synthesize all or most of the major variables so that from a starting economic picture or situation A, one can simulate the consequent picture B after a lapse of time T, by assuming the trend of critical economic variables. So doing, one can have more confidence in the results or forecasts, much like climate change researchers have used sophisticated mechanisms — to aid in their views of the future.

    4. I ask that question because many of the government economic managers may indeed make sense with their pronouncements using only a few variables at a time, but combined with other variables and over time, such pronouncements may not be accurate.

    5. Chempo, I have a feeling that sophisticated computer-aided, data-analytic type of analysis and synthesis are done in places like Singapore, where the leaders are more attuned to the big economic picture in their politics and geopolitics.

    6. The cynic in me conjectures that such a sophisticated, computer-aided mechanism may be available and used also in PH, but if the result is not palatable to the economic manager, may be set aside — that is, if not politically supportive of the Boss.

    • Sup says:

      The computer in now in the palm of your hand..and only used to make important selfies…signed….Bong Go….. 🙂

    • chemrock says:

      NHerrera, very interest questions there.

      It is the realm for people like you, Edgar and Irineo to explain to us.

      Long time ago, Roger Myerson won a Nobel prize in Economics for something he published regarding single item auctions. It was something about how auctioneers can strategise to obtain optimum profits. He based his design on game theory — your pet topic. His paper drove the community of mathematicians crazy. Not exactly on his actual work regarding single-item auction scenario. They went crazy about multiple-items auction scenarios. For 3 decades mathematicians tried to solve the puzzle.

      So NHerrera, here you are asking a somewhat similar matter, but a million times more multi-faceted. Economics is about supply and demand. It bears some semblance to auctions, in so much as profit optimisation is the concern. You are asking for multidimensional mechanism designs, something I think even robots have not yet learnt.

      No matter what AIs can throw out after guzzling on the numbers, Economics is still about “ON THE OTHER HANDS”. I think.

      • NHerrera says:

        Thanks for the note. Roger Myerson, you referenced, happens to be my favorite Game Theory book author ( Game Theory: Analysis of Conflict ).

        Yes. Game Theory as applied to Economics, among others, is useful and yield great results on certain topics. Unfortunately, it gets unwieldy rather fast, when the focus or scope of the variables is other than limited.

    • chemrock says:

      Re (5) I don’t think Spore is the only country to do so. Certainly Philippines too uses whatever advanced sciences available to help make sense to people tasked with cranking those numbers. Of increasing importance now is the capability to do big data analysis.

      There is an investment system going the rounds, extremely vigorously pushed down the throats of the unwary. It’s called the Snap Happy Binary system. It promises to make millionaires of all the small people. It’s billed as robbing the rich to give to the poor. You put in a couple of hundreds of dollars, go for lunch, come back and see it has grown to thousands. The system manages your account and invest in equities. Why they can make such profits. Their system trawls the internet, guzzles up tetrabyte after tetrabyte of data from every crook and nanny, from facebook chats to twits to just about anything. Their system is able to make sense of all these data and pick up leads in stock exchanges all over the world. Their belief? There is a sucker born every minute.

    • edgar lores says:

      *******
      SECOND ATTEMPT

      In Oz, from what I have seen, computers are used in economic planning to forecast the impact of specific political party policies.

      To be sure, computers are also used to forecast general economic trends — GDP, CPI, imports, exports, net surplus or deficit.

      But with respect to political party platforms, the scenarios are somewhat limited, the database unique to the country as gathered, I presume, from census demographic data, tax data, bank data, and historical data.

      The scenarios are usually What Ifs. For example, if the Goods and Services Tax (GST or VAT) is to be increased by x%, what will the impact be on specific economic subgroups — singles; married with single income and no kids; married with double income and no kids; married with single income and two kids; married with double income and two kids — within different income brackets.

      And the scenarios pinpoint which subgroups will benefit and who will suffer.
      The forecasts are reliable to a certain degree because of the accuracy and granularity of the data model.

      I wonder if such a database and model is available in Manila?

      ***

      A computer model that can consolidate all major variables and present a reliable forecast like the weather would be rather difficult. Like how does one forecast FDI which is dependent on the stability of the political situation?

      I guess the computer will need to allow variable manual input from experts for the FDI variable, and calculate the economic “weather” for each variable value (or range). But what other variables, besides FDI, will require variable manual input?

      For each input variation (and variation mix), there will be a different economic “weather” forecast. In the end, the question will have to asked: Which forecast will be taken to be the most reliable?

      In other words, macroeconomic forecasting is unlike weather forecasting. It is more game theoric.
      *****

      • Sup says:

        Philippines don’t need those hi tech computers etc…we soon have Senator Mocha……. 🙂
        (Not to ridicule your serious post Sir Edgar, just me being sarcastic 🙂 )

      • NHerrera says:

        Thanks. Besides, who among the Cabinet Men or Ministers except perhaps the Economic Minister will believe the results of the Computer Model — if it is against the other Minister’s own leanings — if such is put together, not to mention the media. Hahaha, so much for my fantasy thought on “The Model.” 🙂

        I like the thought of @caliphman below: (paraphrasing here) we hope whatever mumbo-jumbo the econ managers do, it does not last long enough, so the patient (the country) is brought back to life after the damage is done.

      • chemrock says:

        Thanks for the info — re forecasting political impact on economics. That’s kind of tough I would think, in Philippines. Because trapos here have no outright ideologies and economic gameplans.e.

        What Philippines need is a model to forecast political impact on economic losses due to corruption under different parties. This model would need configurations that into consideration turncoatism.

        Seriously, I’m sure Philippines too are using all sorts of economic modelling, econometric analysis including stochastic processes, using all sorts of softwares avallablle.

  8. Sup says:

    Today Rappler view.

    The past administration in fact produced some of the best socio-economic results the nation has seen in the 30 years of its restored democracy – notably in productivity, investments, poverty alleviation, and crime control. In fact, it left an inheritance in reserves and unused credit lines that would have made for a strong head start for its successor. Duterte’s own finance secretary admitted as much only recently.

    https://www.rappler.com/thought-leaders/188695-newspoint-harry-roque-disingenuous-delusional

  9. karlgarcia says:

    “I never did see anyone debunking that piece of work. It was flawed in many aspects. Just to mention a few :”

    Chemrock,
    It also appeared on Forbes, and according to Forbes it provoked pushback.

    https://www.forbes.com/sites/forbesasia/2017/06/28/readers-say-global-2000-companies-new-philippine-debt-thailands-richest/#5cc7d21b4d1b

    “”Dutertenomics,” by contributor Anders Corr (June) provoked pushback. Hong Kong’s Volatilian posted: “What he’s doing in this article is raising the spectre of Philippine debt which, according to his analysis–apparently based largely on guesstimates of the interest rates on loans–could reach US$450 billion. He also seems to base his ‘analysis’ on the assumption that the US$167 billion which Duterte has pledged to spend to ‘Build! Build! Build!’ over the course of his term is all coming from China. But it won’t be… . This was underscored by Benjamin Diokno, secretary of the Department of Budget and Management: ‘We do not stick to one country. We are not totally dependent on China for development, but we welcome any help.’ ” Wrote Alvin P. Ang in businessmirror.com: “The Philippines was able to achieve investment-grade status in 2013. Thus, it is unlikely that the rates agreed upon will be higher than the investment-grade rates the Philippines should be getting from the financial markets. The article assumes interest rates not based on investment-grade rating of the Philippines.” Lindsey Lim posted: “Why would the Philippine Department of Finance borrow at 10% when they can borrow from the market for much less? See the rates Japan offered to the Philippines for the rail project.””

  10. karlgarcia says:

    Duterte : “Tapos sabihin nitong mga BB plus, credit. Wala akong pakialam sa inyo [And they raise this BB plus, credit. I don’t care about you],”

    According to Mahatir, investors do not care about politics.
    Though in a speech, he also said that rule of law is paramount.

    Chemrock,
    What is your opinion about Mahatir?

    • chemrock says:

      I liked the guy in his first few years as PM. Dynamic, daring doer. I particularly liked his guts in his push back against the challenges of the council of rulers — the King, sultans and princlings of the states that made up the federation. The Excutive came out on top and subdued a crippling progress of Islamisation in the country.

      I also liked his guts on his view of the Malay Dilemma, a book he wrote in his younger days that caused him to be thrown out of UMNO, the ruling political party of the Malays.

      Unfortunately, power got to his head in his later years. He too was dictatorial in office, much like Lee Kuan Yew. Unfortunately, corruption got in the way as his children amassed great wealth. Not in siphoning the way Filipino trapos do, but connections and favoured deals.

      He too lambasted foreign opinions like Duts but without the putangs. But he clearly has ideas for the betterment of Msia unlike a clueless Duts. And although he has been tough when needed, he has’nt got the Duts inclination for lawlessness. One always get the feeling that one can sit down and have a reasonable chat with him.

      Reply

  11. karlgarcia says:

    “You may love bananas, but if the price drops by 50% it doesn’t mean you will gorge on 20 bananas a day!”

    Is the banana industry sagging?
    Yes, banana is saging like eating salt is asin if you have kidney problems.

    http://opinion.inquirer.net/108406/is-banana-sagging

  12. Sup says:

    Good job Bello….. You made many OFW happy………..not…….

    Halt in OEC processing is P132M economic loss to recruitment sector—expert

    A recruitment consultant and migration expert expressed dismay on Friday over the order of the Department of Labor and Employment (Dole) to stop the processing of overseas employment certificates (OECs) for 15 days, which is estimated to cause an economic loss of P132 million for the country’s recruitment agencies.
    “Airline tickets will have to be rebooked, principals will be angry with agencies, delays with their projects, wards of (household service workers) agencies will be upset, (and) lastly the Secretary did not consult the industry on the disastrous effect on all land based agencies,” Geslani said in a statement.

    The order affects close to 75,000 workers scheduled for departure these coming weeks up to the Christmas season, Geslani explained, quoting data from the Philippine Overseas Employment Administration (POEA).

    http://newsinfo.inquirer.net/945812/halt-in-oec-processing-is-p132m-economic-loss-to-recruitment-sector-expert-dole-poea-ofws-eacs-foreign-employers-labor

    • This has gotten little visibility, which is surprising. It is a bigger pain than bullets in bags. No way to wrap their tickets in cellophane. It was like a solution that caused more problems than the problem.

  13. edgar lores says:

    *******
    Yikes! Please release my comment. Thank you.
    *****

  14. karlgarcia says:

    Mocha Uson a senatoriable?
    OMG!

  15. karlgarcia says:

    Duterte’s apologist excuse is a strong dollar is the cause of the weak Peso.
    Trump’s excuse for a weakening Dollar is….

    https://www.cnbc.com/2017/08/02/trump-lots-of-bad-things-happen-with-a-strong-dollar.html

  16. madlanglupa says:

    I have understood the grim reality that any economy is highly interconnected and any stability is dependent on many factors, some of which most people are not aware of, or because they want something tangible as cheaper fish and rice, or because they don’t want to bother understanding it and choose to spend time doing the most inane and trivial things until the fat lady sings.

  17. Micha says:

    Filing up more foreign debt, this time in Renminbi, through the issuance of so-called Panda bonds, is another idiotic policy this administration cluelessly pursue.

    From dollars to renminbi, the Philippines is selling out to foreigners whatever little sovereignty it still has. It has effectively become a client state, this time a satellite nation in service to the Chinese imperial ambition.

    https://www.rappler.com/business/188783-ph-bank-of-china-panda-bonds

    • karlgarcia says:

      Credit is good.

      • karlgarcia says:

        I value friendly reminders.

        “Karl please repeat after me : deficits are good.

        Don’t worry too much about revenue collection, magkakaroon ka lang ng maraming wrinkles nyan. 🙂”

        • Micha says:

          karl,

          Borrowing in foreign currency always diminishes a nation’s monetary sovereignty.

          If this administration’s plan is to fund its infrastructure projects through foreign borrowings, you can kiss goodbye whatever economic benefits those projects might have because then the gov’t will have to squeeze every revenue generated to pay back or service those foreign denominated loans.

          Deficits are good in the context only of spending in your own locally issued currency.

          Deficit spending in yen, yuan, or dollars will be a disaster for the country.

          Remember Marcos’ appetite for foreign loans?

    • chemrock says:

      I think a funding exercise by itself cannot be viewed through the ‘sovereignty’ eyes. Sometimes adding on the liabilities side is part and parcel of asset-liabilities management. In any case, a bond issue is not a case of borrowing from the PRC govt. They have no leverage over Philippines in respect of the funds.

      The concern to us would be the purpose and the terms of the issue. As to the pricing, if panda bonds are more costly than $ bonds, then why issue in Rmb. We have no such info. That’s the funny part when reading the link you posted. Media never asked questions like these. Price of issue, purpose, terms?

      As for bond issuers you want to make sure the issue is fully subscribed. If there is poor reception, it damages issuer credit standing. Next time the issuer go to the funding market is gonna be much more costly for them. For panda bonds, the PRC investor market is an entirely different ball game. The average fixed-asset fund managers are fixated on their own onshore markets and they are familiar with local credit ratings. They are not familiar with offshore issuers and Fitch or Moody ratings. In the previous panda issue by British Columbia, PRC investors don’t even know where the issuer is from. But of course, all PRCs know about Philippines, so name recognition is not a problem. Then again, is Philippines on their local credit ratings? Does anybody know?

      Sovereignty question aside, I think the panda issue could possibly be more a case of Philippines obliging China, rather than China helping to fund the Philippines. China recently re-opened the panda bond market and they are intent on making this into a huge international bond market. Perhaps it is part and parcel of their game plan to push the Rmb as the intl currency. In the past, too much regulation prevented the growth of panda bonds. One main problem was repatriation of funds. The funds raised were meant to be used in China. I believe this restriction has been lifted. But there remain others.

      I believe one regulation remains. The issuer has to provide financial reports using Chinese accounting standards. I wonder if there are CPAs in the admin familiar with this.

      • karlgarcia says:

        I checked how China check’s for credit worthiness, it is with the number of toot brushes!
        No kidding, they must have checked toot brush sales of SM and Robinson’s.

      • karlgarcia says:

        chemrock,

        China’s credit rating has been down graded, how will that impact our panda bond sale to China?

        http://www.scmp.com/news/china/economy/article/2112376/four-reasons-why-chinas-credit-rating-downgrade-matters

        • chemrock says:

          There is no panda bond sale by Philippines to China.

          Panda bonds is a term for offshore Rmb bonds (means issued by borrowers overseas) funded by onshore investors (means folks in China). Previously no repatriation was allowed (means Rmb raised in China stay in China). So it’s something for say, Mcdonald’s US HQ to raise such Rmb for their China operations.

          So what we have is Philippines govt raise these Rmb by bond issues and these bonds are taken up by Chinese investors in China. These bonds are traded within China.

          By the time the deal is inked, it would mean pricing has already been agreed upon. So it has no impact on Philippines. The issue is fully under-written by Bank of China so if the issue is under-subscribed, BOC will have to cough out the balance. They will take up the slack. But in the financial markets, that would have been a disastrous embarassment for the issuer, in this case, Philippines. It means your name can’t sell.

          The country downgrade puts pressure on Chinese borrowing costs (for everyone — govt and corporates), the Rmb and their bond market. But this has nothing to do with Philippines. If Rmb tumbles, good for the borrower Philippines, if it has not hedged the currency risk.

        • NHerrera says:

          Awaiting chempo’s comment on this. Meantime thanks for sharing your reading. Informative, especially because our build build build projects are tied significantly on Chinese loans.

        • karlgarcia says:

          Am I asking the right question?
          Would their credit rating matter if they are the one’s who will buy our bonds?
          Duterte must realize that credit ratings do matter.

          • karlgarcia says:

            oops NH,
            We typed while Chemrock was typing.

          • chemrock says:

            Karl, their credit rating is their problem. Once we have taken proceeds of the bond issue our only obligation is the redemption on maturity.

            With loans there may be some difficulties if we have not made the full draw down. In a worst case scenario, if a funder crashes out midway in our projects, then our projects are screwed. On a micro-level, many small projects end up this way.

            • NHerrera says:

              Thanks too. Now that is something I understand:

              – Bond proceeds used by PH as issuer and PH paying the bond holders on maturity;

              – Loans to finance projects, but left hanging, in the worst case scenario, when the later loan portions don’t come to finish the project(s).

              So then in the case of the latter, we run to Uncle Gregory or to Uncle Sam for help in finishing those big projects. 🙂

  18. NHerrera says:

    The graphic accompanying the blog article is spot on. TSH, among others, must be famous for the graphics or pictures used for its many blogs. Hats off to Joe, chemrock!

  19. karlgarcia says:

    http://www.ibtimes.com/defense-department-retweets-call-trumps-resignation-mistake-2616121

    Trump has lost the confidence of the DOD…..then I woke up.
    When will our DND retweet such a call.

  20. karlgarcia says:

    Panda bonds, samurai bonds….I don’t think they will implement the 80:20 domestic to foreign loan ratio.

  21. Economics is a very inexact science that there is only one economic law, The Law of Supply and Demand. There are too many variables and unknowns than the equations which can be formed. One has to formulate assumptions and presumptions in order to solve the economic equations. More often these assumptions and presumptions are dependent on the economists, there are as many assumptions as there are economists! This is the main reason why only theories are being formulated! My limited thinking does not enable me to understand these economic theories.

    • I think there is a second law. “What goes up must come down.” Or is that gravity? Anyway, I tend to agree with your confusion, so well stated.

    • chemrock says:

      Haha Willie, you are not alone in the room.

      There are 2 types of economists — the ivory tower types and the practical one.

      The ivory tower types swear by economic theories. They love all the formulae behind those theories. No blackboards or whyteboards are big enough for them. They tend to forget those formulaes are based upon layers and layers of assumptions.

      The practical ones believe in datas. They believe in feeding historical datas into all those economic models. They believe if we squeeze or cajole those datas long enough they will churn out some understanding of the world. They believe the models represent real life worlds and the past is where the future lies.

      Then here is Friedman who believes in anything that is OK as long as it has predictability about the future, it has value. Much like Deng Xiasping’s black cat.

      • one could say the deductive and the inductive types…

        although I consider both extremes inimical to knowledge.

        You need the inductive stuff to have examples, you need deduction to generalize, somewhere in between the two you have statistic sampling and data gathering methods.

        Deductive can suffer from missing assumptions that come into the equation, inductive can suffer from missing observations due to a scope limited by one’s own routines and life.

        Someone living near high-rise housing in Berlin might think the city is totally drug-infested as a whole but just be looking at around 20 blocks with 30 stories of people living there. National stats of anything just averaged out lead to nonsense as well, ignoring extremes.

  22. caliphman says:

    Very comprehensive coverage of a rather complicated and controversial topic. If your portrayal of Duterte’s hired economic and financial managers is that their main aim is to mask the deteriorating macroeconomic fundamentals, I share the same view except their spin on the facts is meant not only to reassure the public but more importantly to please Duterte. My main hope is that it takes a while before any administration here or in other countries can significantly and permanently damage or build a nation’s economic engine and that this bizarre regime will have a short and transitory effect on our financial health…Marcos, Maduro, Mugabe and other enduring dictatorships aside.

    • chemrock says:

      “..it takes a while before any administration here or in other countries can significantly and permanently damage or build a nation’s economic engine..”

      Agreed.
      Thank goodness for 6 year terms.
      So watch out for parliamentary federalism.
      The nation said no to Arroyo parliamentary once. Can she creep in under federal cover.

    • madlanglupa says:

      > I share the same view except their spin on the facts is meant not only to reassure the public but more importantly to please Duterte.

      This government is occupied by a lot of “yes” men and women; they aim to please more than to present realities and fix them.

  23. popoy says:

    I gradually realized over the years
    when my one hour was no more
    or less exactly just one hour to
    now when my hour really is
    four hours; when my 100 pesos
    was worth 100 US dollars to
    the time it was reduced to 20 dollars
    to the grieving present when its worth
    is only less than 2 US dollars.

    Legal tenders don’t cry before burials
    while snoozers (economists?) in the
    noodle kitchen using assumption science
    incessantly tries to figure out WHY.

    It’s elementary says unabashed Popoy
    who was fence sitter, a do nothing troll
    took him may be 70 years to understand
    as he was growing old amid the squalor
    it is NOT the eche bucheche of economics
    but nakaw science, NAKAW SCIENCE
    subtle, flawless, bloodless and everlasting
    as the thieving multitudes of scientists applied
    Nakaw Science to the hilt.

  24. popoy says:

    I just remember I might have written something about the economic crisis, so I searched my files. EUREKA ! Meron nga, mahaba pala kasi sa Tagalog eh. pero unpublished pa. Para lang sa mga may panahon at tiyaga, baka sakaling may mapulot na bagong pangunawa.

    The Economic Crisis From the Eyes of A Dummy

    Sa nakaraang sinulat ko sa krisis ekonomiya, nabanggit ko: Trabaho ang ugat ng krisis. Sa pananaw ng iba mali yun. Sangayon naman akong mayroon ibang angulo kasi ang krisis napakaraming bintana. Mga bintanang kung saan masisilayan ng iba’t ibang mata ang katangian o kapangitan ng problema. Wala pa yatang ipinanganak na puedeng maglahad ng kapanipaniwalang buong katotohanan sa krisis ekonomiya. Napakaraming bersiyon wika nga.

    Bago husgahan ang problema at linawin ang kamalian sa mata ng tao at ng Diyos, mas magaling seguro tignan ito sa pamamagitan ng maraming bintana. Ang mga propesyon ay may mga sariling bintana na magpapalawak ng kanilang pananaw. Halimbawa ang bintana ng abogado, iba sa doctor, iba sa ekonomista, at iba sa inhenyero, Sila ay may mga sariling bintana na kung saan makikita ang kalawakan at mga sulok ng problema. Di man lahat kayang talakayin, napakaraming rin angulo na sa balitaktakan ay makakagulo.

    Kaya ito, ibabahagi ko sa inyo ang aking bintana, na tulad ng krisis ekonomiya ay hindi puedeng bansagan ng tamang pangalan.

    Sa high school unang kong natisod ang “economics.” Yan daw ay siyensia ng pagpapayaman: a science of wealth getting. Sa College naman, isinasaad o laging paalaala ng aking propesor yan daw ay tungkol sa walang kabusugan ng mga tao, “insatiability of human wants.”

    Nabasa seguro ng marami, Kailan lang sinabihan ni Pangulong Obama ang mga bankers sa Wall street, “Nakakahiya kayo, Magpakita naman kayo ng responsibilidad.” Magalang pa rin si Obama. Shameful (nakakahiya) at hindi shameless (walang hiya) ang salitang ginamit niya. Yan ay matapos sabunin ng mga Amerkanong Kongresista ang mga hepe ng US car companies dahil sumakay sa kanilang private jets upang humingi ng limos masalvar lang ang kanilang mga kompanya at mga mangagawa. Ayaw pa noong una, pero pumayag din silang di muna tumanggap ng sweldo habang meron pang krisis.

    Mula noong 1954 hanggang 2009 Nabuo sa isip ko ang “economics” pala ay siyensia ng kunyari. Sa labas ng aking bintana ang dami pa lang mukha ng agham ng ekonomiya. Mga mukhang maganda o kaya pangit, makapal o makinis, o kaya’y tadtad ng tagihawat, depende sa angulong pagmamasdan. Meron pang mga jokes na tila may bahid ng katotothanan.

    Ang krisis sa biglang tingin, sa unang silip ng isipan, maraming tao sa buong mundo ang naloko, nadenggoy, nawantutri, nanakawan hindi sa paraang “wan on wan” tulad ng pangkaraniwang krimen. Ang krisis ay bunga ng “meni on meni” malawakan, laganap, garapal. Pati yung hindi naghahanap ng kagitna, yung hindi naghangad yumaman dahil walang kakayahan, nadamay.

    Sa masusing tingin naman, ang krisis daw ay bunga ng kapabayaan ng gobierno na nakapamulsa lang. Hindi nirendahan bagkus inayudahan pa ang katakawan sa kalakalan. Ang mga bidang sangkot sa krisis ay mga bangko, mga eksperto sa “investments” o pamumuhunan at mga taong siyang simula at rason kung bakit ang siyensiya ng ekonomiya ay naimbento. Mga taong nais magpalago ng ari-arian para sa isang maginhawa at marangyang pamumuhay.

    Balangkas at Mga Tornilyo ng Krisis

    Kwarta o salapi, isang tambak o kahon-kahon, na gustong makamit o makamkam ang semilya o binhi ng krisis. Bulsa naman ang punlaan at bangko ang taniman para lumago ang perang yaman. Ang “rules of the game” o reglamento na nakakaluko sa tao ay: yung nagdedeposito sa bangko, panalo, dahil maliit na tubong idadagdag ng bangko. Yung umuutang sa banko, talo dahil malaking patong sa tubong sisingilin nito. Ang gobierno nakatingin lang, ke utang o deposito may kaltas na buwis ito kaya laging panalo.

    Patong hindi “Tongpats” hindi rin tubo ng pera

    “Interest” naman ang pataba o abono ng krisis. Maaring sabihin “patong” sa deposito o sa utang at “tongpats” sa mga “pating” at dambuhalang sumisila sa kaban ng bayan.

    Ang buhay ng bangko ay nasa mga umuutang, wala sa nagdedeposito. Maaring mali. Mahirap patunayan o paniwalaan sa dahilang kung wala ang nanay at tatay mo, wala ka. Pero kung wala ka hindi rin sila magiging nanay at tatay. Ganoon din kung walang deposito wala ring bangko. Kung meron bangko ay dahil meron deposito. Pero dahil din sa bayad sa patong at gastos sa mga empleyado, sa tinagal-tagal ng panahon ubos ang deposito. deadma ang bangko. Mas malaki ang lalabas kaysa pumapasok na pera. Kaya ang bangko kailangan ding meron bangkong magbibigay ng mas malaking patong. Yung nangungutang para din bangkong nagbabayad ng patong sa nag pautang. Kaya sa bandang huli nasa nangungutang ang buhay ng bangko. Nasa kanila rin ang hininga (pambili ng pagkain at gamot) ng mga maliit na nagdedeposito.

    Pag hindi nagbayad ang mga nangutang, “intensive care” ang bangko, sa morgue naman ang tuloy ng mga nagdeposito.

    Ang “interest” o patong naman sabi sa mga libro ay bayad sa paggamit ng pera. Ginamit mo ang pera ko, bayad ka segun sa takda ng batas o tindi ng pangangailangan. Sa mga “dead hungry” (patay-gutom) mas matindi mas malaki ang patong ng mga pating sa katihan (loan sharks). Kung malabo ang batas sori ang mga nangungutang kung hindi sila director ng bangko.

    Sa mga Filipino ang “interest” o patong ay taliwas ang kahulugan. Maraming nahihikayat sa wikang “sa alkansiya matutulog ang pera mo pero sa bangko tutubo at lalago ito.” Ang “interest” ay tila hindi bayad sa paggamit ng pera mo, kundi tubo, utang na loob mo pa sa bangko. Ginamit na ang pera mo, utang na loob mo pa.

    Ang alam ko, sa Koran, bibliya ng mga Muslim hindi sang ayon sa “interest” o patong. Sa Kristianismo yata nagsimula ang patong. Kaya si Kristo itinumba yung mga mesa ng “money lenders.” Kaya seguro walang sinco-sais (five-six) sa simbahan ng Quiapo. Pero nagwakas ang buhay ni Kristo sa Golgotha, mga “money lenders“ hanggang ngayon buhay na buhay pa. Noon panahon ni Kristo ang “money lenders” ay isang uri ng bangko na walang namang nagdedeposito. Patuloy pa ito sa mga palengke sa kalawakang Pilipinas. Mga bangkong ganito ang negosyo at sanctuaryo ng ilang nating kababayan sa gobierno.

    Sa sampung utos ng Diyos maraming bawal pero hindi kasama roon ang maging pating sa katihan. Kahit wala sa sampung utos, bahagi rin seguro ng kristianismo ang makataong karapatan na hindi puedeng makulong sa piitan dahil sa utang.

    Sa krisis ngayon papaano yung hindi naman nangutang pero siyang gumamit at nagtamasa sa utang? Sa panahon ngayon sa daming ng pininsala ng krisis, hindi kulong kundi bitay seguro ang dapat na parusa sa mga may kasalanan.

    Masalimuot talaga ang krisis ekonomiya. Pag nagtanong ka sa ekonomista, para kang nagtanong sa doctor ng medisina. “Doc ano ba talaga ang sanhi ng heart attack, high blood pressure, o stress, taba ng baboy o baka, galit ba o tuwa, pagod o sobrang pahinga? Simpleng sagot ng doctor; “Halos lahat yan, para malinawagan ka heto ang tarheta, magaling na cardiologist, kumunsulta ka.”

    Kung ikaw ay taong kalye (man in the street) lang, hindi estudiante, at kung hindi mo anak, wala kang pagkakataon magtanong sa ekonomista. Di tulad ng doctor wala silang lakad-pasok (walk-in) na klinika. Opisina ng ekonomista bukas sa capitalista, hindi sa mga urirat na wala namang pera.
    Wakas ng sanaysay *** February 3, 2009.

    • popoy says:

      Tall Tales from the Decameron este Tigulang:

      Binasa ko uli yung sinulat ko sa itaas kasi pampataba ng puso at pampalaki ng ulo (hindi normal sabi ng doctor) pero nakakalibang eh sa mga kagigising lang na tigulang. Pagdating sa dulo kinabahan ako dahil na alaala ko noong dahil sa request ng JICA pinagaralan ko yung Japanese Forestry Project sa Pantabangan; Natulog ako ng ilang gabi sa HQ nila sa Carranglan, Nueva Ecija. Sabi ng mga Pinoy opisyals, pinasok daw sila at pati mga Hapon expats eh na teach in o nalekturan ng mga NPA tungkol sa problema ng bansa. Hindi daw ako dapat matakot, baka bumalik sila at mag lecture uli

      Sa tema ng sanaysay ko, sa pananagalog ko, parang nagte-teach in ako sa liblib na baryo sa Tarlac o sa Quezon province noong Martial Law at parang na-imagine ko nandoon nakikinig si Kumander Dante o kaya si Father Balweg. Buti na lang yun mga pangyayari noon ay tubig na lang sa ilalim ng tulay.

  25. popoy says:

    Relax, oras na para maglibang naman, pahinga sa utak. Eh.

    water under the bridge? pulis under the bridge? what’s that?

    here is a POSITIVE RAP para sa mga ALAT ng Pinas

    https://ruclip.com/video/iBGEWxKPmMk/may-pulis-sa-ilalim-ng-tulay-by-kawago-with-lyrics.html

  26. Kamote Procopio says:

    Another great read from the guru Chemrock. I will now have a better explanation to my friends and relatives about the dropping exchange rate of the peso and it’s correlation to the economy.
    Thanks for the education and am excited for the next one. 😊

    • chemrock says:

      Kamote appreciate you went through the gruelling read haha.
      We are just sharing here, the great give and take in TSOH.

      • sonny says:

        “… you went through the gruelling read haha.”

        Chempo, I’m using your very educational blogpost as a tool to understand current picture of economics of the Philippines. Side by side with your piece I’m studying the postwar (1946-61) PH economics as analyzed by Frank Golay in his book THE PHILIPPINES, Public Policy and National Economic Development. The book is based on his doctoral thesis written for Cornell U. I’m hoping I’ll get a good before-during-after pictures of our checkered economics. Thank you for writing your “grueling” article. 🙂

  27. Sabtang Basco says:

    Why are there so many Filipino nurses in the U.S.?

  28. karlgarcia says:

    http://newsinfo.inquirer.net/946107/duterte-i-dress-for-comfort-and-not-to-impress

    He does not care about us.
    Protocols, dress codes,etc are there for a reason, not to make him comfortable.
    We are not comforted and impressed by that!

    • trebor9 says:

      It was so demeaning to the Pilipino people when the president disrespect the National dress in an international gathering of world dignitaries and appeared so undignified. That was not how a Pilipino present himself to convey an important social message in a manner that is worthy of respect.
      I won’t be surprise to know that the next urgent bill by his minions, is to replace the national dress from Barong to a comfortable DU30 prepared t-shirt.

  29. https://www.theatlantic.com/magazine/archive/2003/12/how-to-kill-a-country/302845/

    Turning a breadbasket into a basket case in ten easy steps—the Robert Mugabe way

    1. Destroy the engine of productivity

    2. Bury the truth

    3. Crush dissent

    4. Legislate the impossible

    5. Teach hate

    6. Scare off foreigners

    7. Invade a neighbor

    8. Ignore a deadly enemy

    9. Commit genocide

    10. Blame the imperialists

  30. karlgarcia says:

    “It’s daily turnover is only about Php 10B, even smaller than late comer Vietnam.”

    Even smaller..

    Average daily value turnover at the end of the semester amounted to P8.08 billion compared to P7.51 billion in the same period last year.

    Read more: http://business.inquirer.net/234315/pse-aims-p800m-profit-year#ixzz4yy1ZXp00
    Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook

  31. Sabtang Basco says:

    https://business.inquirer.net/240876/philippine-news-updates-gross-domestic-product-peso-philippine-dealing-system

    Chem, I believe you than Inquirer’s (fake) news or their (fake) sources. They are trying to missile us because only minority of Filipino OFWs or their family receiving remittances know what drives exchange rate.

    So, GDP under Duterte is shooting to the sky. Or, they are patronizing Duterte with this article? I do not know. BUT YOUR ANALYSIS MADE ME PRINT YOUR ARTICLE AND READ IT OVER AND OVER AGAIN. You make more sense than Rappler and other fake-columnists that are addicted to science of politics.

    I do not normally show admiration to any article but this article I say is 5 star.

    • chemrock says:

      Thank you SB, and Lance, for the vote of confidence.

      I doubt very much that quarter to quarter announcements of preliminary GDP figures really impact the FX market. GDP expectations definitely is a factor in market sentiments, but it has already been factored in long ago. My personal forecast is by end 2018 then we can really see the negative impact on the GDP from the fiscal course taken by the admin.

      Notice the mention of jump in peso trading volume? Does that indicate central bank intervention?

  32. Another one printed and saved to my collection of Chempo articles.

    thanks, chemp!

    • chemp,

      I just recently played a board game, which made me think of your article:

      Here’s the short How to…

      • https://boardgamegeek.com/thread/475702/imperial-2030-why-game-awesome

        I’ll post a longer commentary after I play this game a few more times, but essentially it’s the big boys’ Monopoly game. Almost like playing Risk and Diplomacy, plus Monopoly, at the same time (Chinatown too, but I’ve only played that game once).

        Joe, definitely get this game for your son.

        • Here’s Chinatown,

          “This is a negotiation game in the truest sense of the word. In it, players acquire ownership of sections of city blocks then place tiles, representing businesses, onto the block-sections. At the end of each turn, each tile you’ve laid gives you some sort of payout, but completed businesses (formed of three to six connected tiles of the same type) pay quite a bit better. All these resources are dealt to the players randomly, however, so players must trade to get matching businesses and adjacent locations.”

        • Thanks for the tip. He’s ready to graduate from monopoly, beating me quite regularly.

          • No problem, Joe.

            Also, while you’re getting Imperial 2030 , you’d might want to check out Onitama , it’s really simple, yet almost better than chess (almost— i think it is in a way better but i’m just biased for chess, deceptively simple this Onitama , hence worth the looksy).

    • I just realized also that playing “Secret Hitler“, touted as a social deduction game, would be of great value for your Filipino C-D-E folks there, I’m sure A-B crowd too would love it.

      This game came out last year 2016, and is a hit at Target, Wal-mart and Toys R Us now. I think its popularity was fueled largely by Trump (ie. as Fascist), to the point where some enterprising folks actually created Trump cards for the game,

      “In Secret Hitler, five to ten players are randomly divided into two teams: liberals, who want to expose Hitler, and fascists, who want to elevate him to power (one of those fascists is the Secret Hitler himself). The liberals always outnumber the fascists, but the fascists have the key advantage of knowing each other, and knowing who Hitler is (Hitler doesn’t know where his fascist support comes from in bigger games, though).

      Both teams are racing to pass enough of their preferred policies (five for the liberals, six for the fascists) to take total control of the country before the other side. The fascists can also win by electing Hitler chancellor after three fascist policies have been enacted, and the liberals can win by assassinating Hitler (more on that later).

      At its core, Secret Hitler is a game about voting. Every round, the role of president rotates clockwise around the table, and that president has to appoint a chancellor who he will work with to enact the next policy. The entire table needs to approve that chancellorship with a public majority vote, or the presidency (and the appointed chancellor) moves on to someone else.

      After a chancellor is approved, the president draws three cards from a policy deck, which is packed with more fascist policies than liberal ones. The president chooses two of those policies to pass to the chancellor, who then picks one of them to actually enact into law.”

  33. Ariel Escasa says:

    “As at Jun 2017, the total external debt was $72.5B. This is the total of public and private debt to foreigners and the split is about 50/50. Of this, $72.5B, or about 70% is in US$…”

    Typo error? I think this merits correction.

    • chemrock says:

      You are partly right. The last sentence is rather queer is’nt it? What I meant is “Of the $72.5B, 70% is in US$.” 70% of the total external debt is US$. I’m struggling with a faulty keyboard. Sometimes when I hit a letter I don’t understand why it gets inserted somewhere else. I had to do lots of re-read.

      Thanks for your eagle eyes. I’ll edit that.

  34. karlgarcia says:

    While we are slicing and dicing the economy,we could not avoid disecting the underground or shadow economy.

    https://businessmirror.com.ph/business-in-the-shadows/

  35. karlgarcia says:

    Fitch raises PH credit rating as investors ignore drug war noise

    Read more: https://business.inquirer.net/242330/fitch-raises-ph-credit-rating-investors-ignore-drug-war-noise#ixzz50uvkCJg8
    Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook

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