An interesting reading session tonight for The Economizer, as news about Noynoy Aquino's plans for his impending assumption of his country's Presidency, the Vietnamese economy's downward spiral, and what might be termed "inconsistency" in the decisions of the Supreme Court of the Philippines emerged.
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First, Noynoy Aquino's presidential plans. Perhaps miffed by insinuations regarding his lack of experience and the inexistence of a campaign platform, Senator Benigno Aquino III has spoken -- and spoken loudly. The banner headline in the Philippine Daily Inquirer announced in boldface letters: "Aquino to create group to run after Arroyo ‘crimes’." Not content with announcing that he will cause the impeachment of a still-to-be-appointed Chief Justice, the good Senator now speaks for a future Justice Department in assigning State Prosecutors to future cases against President Arroyo. Just so the Filipino people are clear about what they are voting for:
There are several things wrong about this plan. One, the Senator has not yet been elected President. Granted, candidates have a duty to explain what their platform of government is. But is the next Administration really dedicated to the prosecution and imprisonment of the outgoing Administration? The courage is not in the the former, but in the latter: could the present Cabinet really preside over a peaceful transfer of power given that they know they would be prosecuted by the next Cabinet? That this remains a democracy is no thanks to the election front-runner -- credit is due the anonymous, unsung men and women who, despite having no mention in the media, despite all the threats of prosecution, despite the uncertainty of their future, keep the government functioning.
Two, the Senator's statement is a conclusion that obscures due process and preempts and prejudices the future prosecutors. What if they found no evidence, or found it insubstantial? Would the future President keep firing them until he found someone willing to "find" it otherwise? Such is the regard to which the law is held by our presumptive President.
Finally, what does it say of a President who has nothing to say about energy, agriculture and tax policy except that whatever is wrong is attributable to the evils of the President he replaced? The idea is absurd, too absurd to merit a reply. Except this: such is no platform of government.
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Second, news about Vietnam, which could affect the Philippine economy. According to The Economist, that country is suffering from "dollar shortage," which is fatal for a country that depends on trade to grow its way out of poverty. (The Philippines relies on domestic demand and the export of people.) This has led the central bank, the State Bank of Vietnam (SBV), to devalue the currency -- by 5.4% in November 2009 and 3.4% in February 2010.
The effect is high inflation. Standard Chartered warns that although Vietnam's GDP growth this year will be 6.7%, inflation would be high and trade deficit will widen. Analysts expect inflation will be 8.9% for the whole of 2010, up from 7% in December 2009. This compares with about 4.3% for the Philippines in February 2010.
The higher inflation drives up interest rates, and, coupled with a reduction in liquidity from open market operations by the SBV, crimps lending growth.
What this means is that Vietnamese assets are falling in value, due to the currency devaluation and the increase in interest rates. The end-result is that foreign capital, denominated in foreign currency, cannot bear the mark-to-market losses any longer and leaves the country. The only result from devaluation is more devaluation.
There are lessons here for the Philippines. One is the importance of a stable source of foreign currency. The Philippines is lucky in having so many of its people remitting billions of dollars monthly, so much so that more than 10% of the 2009 GDP is made up of remittances. The other big dollar-earning industry, business process outsourcing (BPO), is not due to luck. These factors -- OFW remittances and BPO earnings -- keep the cost of foreign debt manageable, such that despite the recent upgrade of Indonesia by credit rating agencies, the Philippines' credit spreads remain smaller.
(A note must be said that both OFW and BPO have a social cost that are far removed from high finance. It is counted in terms of broken families and an increase in HIV/AIDS cases.)
The other important lesson is the control of public spending. The recent extension of VAT exemption to senior citizens is an example not of concern for the elderly, but of concern for the elderly vote. If, instead of granting a 32% across-the-board discount for a substantial proportion of the population, the service quality of DSWD, SSS and GSIS and other government bureaucracies and programs had been improved, the poorest of the elderly would have benefited immensely and disproportionately. What happened was that all elderly people -- rich, poor, and other non-earning members of the citizenry -- made gains at the expense of the earning population.
The main proponents of the Expanded Senior Citizens Act are Senators Loren Legarda and Pia Cayetano, who do not need any more "pogi points" or "beauty points," judging from their photographs. The Philippines, however, does not need to follow the example of Greece and add to its budget deficit. A Vietnam must be avoided.
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Finally, a worrisome trend at the Supreme Court, pointed out by Dr. Winnie Monsod. It appears that an earlier decision stopping the sale of the assets of the Philippine National Construction Corporation (PNCC) to a Malaysian consortium is about to be reversed by a "second" motion for reconsideration (MR). That sale transaction, amounting to billions of pesos, is a curious case because only the assets will be transferred to the Malaysian entity, but the Government of the Philippines retains the liabilities.It is disadvantageous to the Government (and the Filipino people), yet it is about to be given a blessing by the Court through an arguably illegal method.
It is a good thing that Chief Justice Puno has abandoned his quest to spearhead "moral" politics in the country. People in glass houses should not throw stones.
