The Most
Important Appointment
March 3, 2019 | 10:13 pm
By Romeo L. Bernardo
We mourn the passing of Governor Nesting Espenilla. A
profound loss to his family and friends, to the BSP which has been his home
since UP days and to our country and people. As a tribute to him and his work,
I am sharing the introduction of an interview Christine Tang and I did for
GlobalSource Partners (globalsourcepartners.com) in January 2018.
‘CONTINUITY ++’
His job was going to be “the most important appointment” that President Rodrigo Duterte was going to make. That was what Finance Secretary Carlos Dominguez told the President, who was then less than a year in office, about his upcoming choice for the next governor of the Bangko Sentral ng Pilipinas (BSP). The Secretary made sure to let the President know that if it were up to him, he would prefer someone in the mold of Amando Tetangco, the highly-regarded and multi-awarded BSP Governor who, for 12 years, was a stabilizing anchor to the Philippine economic ship.
It was thus the most awaited announcement in the local
financial community at the start of 2017, a time of high anxiety due to
political and economic uncertainties here and abroad. The President bided his
time in naming Mr. Tetangco’s successor, and in the interim contributed to the
air of uncertainty with his unorthodox style and outspokenness, including
threats against the Anti-Money Laundering Council (AMLC), chaired by the BSP
Governor, which raised more fears that he would name a political ally to ensure
the AMLC’s cooperation in his drug war.
Nestor A. Espenilla, Jr.’s name was finally announced around
dinnertime on May 8, instantly putting economic watchers and the financial
community in a celebratory mood. Commentators toasted the President for
choosing wisely, someone not known to him personally; they saluted Secretary
Dominguez for helping the President choose wisely with, we heard, a very, very
short list of candidates; and praises went to the BSP for having nurtured and
trained a bright and talented young economist into a mature central banker who
easily stepped into the leadership role when the time came.
Mr. Espenilla took office on July 3, 2017, perhaps the most
well-rounded in central banking of all those who came before him. His career in
the BSP (previously, the Central Bank) spanned over 30 years, starting in
economic research, then international operations, then supervision and
examination of financial institutions, where he rose to Deputy Governor in
2005. Like his predecessor, his was a crisis-tested professional life, going
way back to the 1980s debt crisis, followed by the Asian Financial Crisis in
the 1990s, and the Global Financial Crisis a decade later. Graduating magna cum
laude, Mr. Espenilla held a BS in business economics degree from the University
of the Philippines where he also earned a masters in business administration
(MBA). He also had an MS in policy science from the Graduate Institute of
Policy Science in Tokyo, Japan.
Those who knew Governor Espenilla were one in saying that
his rich experience, high intelligence, and humble and easy disposition equip
him well to continue the legacy of Governor Tetangco in shaping the BSP to be
“alert, nimble, responsive and able to provide the stability necessary to give
direction that the market needs at any time,”while breaking new ground in the
Philippine’s quest for greater financial inclusion and capital market
development, and in facing new challenges coming from increased global economic
and financial integration and disruptive technology.
I share the hope of the financial community and general
public that once again, authorities will choose wisely and well to ensure
“Continuity ++” in our central bank and our country’s finances. To do otherwise
risks gains made to bring us on a much higher growth path of 7-8% annually to
improve our people’s lives. Even the lower end of this range is ambitious. Our
forecast for GlobalSource Partners is only 5.8-5.9% over the next two years,
among the less upbeat. This is what said in our Chinese New Year cum
Valentine’s Day report :“The Days of Swine and Roses.”
“The economy’s recent performance, where higher domestic
demand growth led to higher import leakages, suggests that growth rates
approaching 7% are unlikely in the short term. Too, monetary tightening last
year that raised interest rates by a total of 175bp will exact some pain on
consumer and business spending. Thus, despite falling inflation and some
reinforcement from election spending, we think that output growth will continue
to slide and fall below 6% as opposing forces weigh on domestic demand
components.
In particular, while household spending can rely upon the
usual support from overseas remittances, growth is expected to remain in low
single-digit, with friendlier foreign worker policies in Japan counteracted by
tighter visa policies in the US even as countries in the Middle East continue
to grapple with fiscal problems and favor local-hire policies. Likewise, while
the BPO industry is looking at continuing jobs expansion, the sector grew
markedly slower last year and remains under threat not only from adoption of AI
technologies but also from uncertainty in the business climate as the mid-term
elections near with government’s proposed reform on corporate taxation passed
over by Congress. Fiscal spending, which has been a key driver of recent
growth, may also hit speed bumps in the near-term associated with the delayed
passage of the national budget, election spending bans and potentially, closer
scrutiny of budgetary processes that may have permitted quicker procurement
recently. Continuing strain from net exports is also expected.”
THE MOST IMPORTANT LEGISLATION
The one counterweight to these headwinds is the recent reform of our rice policy, an on-and-off effort of over 35 years, finally achieved by a strong and purposeful administration. Against wrong-headed populists and well-heeled profiteers, the Dominguez team and Congress passed The Rice Tariffication Law. This is transformational — in ending rice price-induced inflation, in reviving our moribund agriculture, in reducing malnutrition and poverty, in making our manufacturing sector more wage competitive. It will also stop NFA corruption and save taxpayers tens of billions annually.
There is now an opportunity for yet another milestone
legislation. By amending the archaic Public Services Law (Commonwealth Act no.
146, 1936) we will open up the country to foreign direct investments in
strategic sectors, such as transport and telecommunications, making such needed
services more available, creating jobs, and improving the competitiveness of
the Philippines. Increased foreign direct investments can also help finance the
growing current account deficit. There is an opening in the resumed session of
Congress in May to bring this to the finish line. Our Foundation for Economic
Freedom urges the Executive and Legislative branches to give this top priority.
Romeo L. Bernardo is Vice-Chairman of the Foundation for
Economic Freedom and GlobalSource Partners Philippine Advisor. He was Finance
Undersecretary during the Corazon Aquino and Fidel Ramos administrations.
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