Analysts say peso could hit P46 per dollar

Business World Posted on January 22, 2014 11:44:39 PM

THE PESO could weaken to as much as P46 to a dollar, New York-based consultancy GlobalSource Partners said, but will likely end the year at around P43-44.

“To the extent that continuing portfolio rebalancing by both residents and non-residents leads to capital outflows, there may be additional pressure on the peso. We would not be surprised if it tests the P46/$ level in the weeks ahead,” GlobalSource’s local partners Romeo L. Bernardo and Marie-Christine Tang said in a market brief issued yesterday.

A reversal, however, could come “in time” and “while reverting to a P40/$ exchange rate is highly unlikely, we think there is a more than even chance of the peso settling at around P43-P44/$ by yearend,” they noted.

The peso has been trading in P45 per dollar territory since Wednesday last week. It closed yesterday at P45.20 per dollar, up five centavos from Monday.

The GlobalSource economists said the economic managers were likely supportive of a weaker peso, seeing this as part of a “region-wide response to continuing speculation about the likely strength of the US economic recovery and its impact on the Fed’s taper.”

On the question as to why the peso is depreciating more than Asian currencies, they said: “It appears the answer lies in the comparatively low domestic yields on peso instruments versus other Asian fixed income and by extension, a narrower differential vs. US treasury yields.”

The expected reversal, they said, will be due to an “improving outlook on current account earnings, particularly electronic exports, BPO (business process outsourcing) services and remittances, due to the prospect of improved growth in advanced countries especially the US...”

The interagency Development Budget Coordination Committee, which sets the government’s macroeconomic targets, forecasts the peso to settle within P41-44 to the dollar by yearend.

Infrastructure lack behind power woes

Business World 
Posted on January 14, 2014 11:35:09 PM

By Bettina Faye V. Roc, Reporter

ONGOING power issues highlight the Philippines’ lack of the necessary infrastructure, New York-based consultancy GlobalSource Partners said, which could be a threat to economic growth prospects moving forward.
 
“All told, limited power reserves particularly in Luzon imply that power rates will remain volatile going forward,” GlobalSource’s local partners Romeo L. Bernardo and Marie-Christine Tang said in a report released on Monday.

“While the fluctuations will contribute to higher headline inflation every now and then, the overall impact may not be too worrisome considering that ‘electricity, gas and other fuels’ form about 7% of the CPI (consumer price index) basket,” the economists noted.

Inflation averaged 3% last year, just above the central bank’s 2.9% forecast and at the low end of the 3-5% target.

The 3-5% goal has been carried over for this year, while that for 2015 is a lower 2-4%.

They said that at first glance, a power rate hike announced last month by Manila Electric Co. (Meralco) -- at the moment on hold following a restraining order issued by the Supreme Court -- “is an extraordinary one-time event with an extremely low probability of recurrence.”

However, they said that upon closer examination the price spike “is symptomatic of the power grid’s thin reserve margins.”

“The Energy department’s supply-demand outlook for the Luzon grid (that includes Metro Manila) shows that as early as this year’s summer months, around May, power demand is expected to reach levels that are critically close to the grid’s available capacity with supply deficits, meaning outages, seemingly highly likely by the summer of 2016, even after considering the additional capacity from various committed projects.”

The outlook means that a forced shutdown of any major power plant or delays in the commissioning of committed power projects may cause a rise in electricity rates.

This was seen in the last two months of 2013 when maintenance work on the Malampaya natural gas facility from Nov. 11 to Dec. 10 was compounded by forced outages in several power plants. Another factor was the breakdown of the Leyte-Luzon power transmission link due to super-typhoon Yolanda.

The Malampaya shutdown forced plants supplying Meralco to use more expensive liquid fuel, which the distributor said was the main factor behind the need to raise rates charged end-users by P4.15/kilowatt-hour (kWh).

The increase -- a P3.44/kWh generation charge, P0.04/kWh transmission charge, P0.33/kWh for taxes and P0.34/kWh for other charges -- was approved by regulators. It was to be spread out over three months: P2.41/kWh for December, P1.21/kWh in February and P0.53 in March.

Meralco last week said continued supply issues would require a P4.56/kWh generation rate hike this month, to be deferred given the Supreme Court order.

“Even a fully contracted utility can end up with significant exposure to the spot market during times when their contracted plants are out due to maintenance, or when demand surges beyond projected levels,” the economists said.

Reducing this exposure through measures such as contracting standby capacity or hedging via short-term forward contracts require regulatory approval, they noted. Such policies, they said, have discouraged much-needed long-term investments in the power sector.

“[I]nfrastructure bottlenecks are a constraint to sustaining the economy’s rapid growth ... as demonstrated by events leading to the recent price spike, the risk of inadequate power especially during periods of high demand and low capacity or supply interruptions seems quite high,” Mr. Bernardo and Ms. Tang said.

A situation similar to what happened in the 1990s, when power supply constraints led to rotating blackouts, is possible in the near term, they warned, and could result in lost output and foregone investments.

“This may happen as early as this summer if peaking plants are not deployed due to lack of fuel arising from a prolonged payment interruption,” they said.

‘Trying times’ to weigh on growth

BUSINESS WORLD

Posted on November 17, 2013 10:12:25 PM

By Bettina Faye V. Roc, Reporter

PHILIPPINE economic growth will remain strong, a New York-based consultancy said, but may slow in the long run as the government deals with policy and economic challenges.

The Aquino administration is in the middle of "trying times," GlobalSource Partners said in an outlook released last week, with its reform agenda at risk of being derailed by ongoing political issues as well as a series of natural disasters.

"Since late July, the nation’s leader has had to face down an armed conflict in the south, deal with public anger over the theft of public funds and the pork barrel system, counter questions about the legality of his own budget juggling and cope with a series of natural disasters, including the massive devastation wrought by super storm Haiyan (local name: Yolanda)," GlobalSource’s local partners, Romeo L. Bernardo and Marie-Christine Tang, said in the report.

"For now, we expect growth to stay above trend in the short term but think that maintaining the current high consumer and business optimism may become more challenging, a risk to sustaining high economic growth further out," the economists added.

GlobalSource’s gross domestic product (GDP) growth forecasts for 2013 and 2014 are 7.2% and 6.2%, respectively. The Philippines grew by 6.8% last year, exceeding the government’s 5-6% target.

First-half growth reached 7.6% this year, also well above the government’s 6-7% goal. Next year, growth is targeted to reach 6.5-7.5%.

Mr. Bernardo and Ms. Tang said the "festering scandal" involving the alleged misuse of legislators’ Priority Development Assistance Funds (PDAF), which has since evolved to include the reported unconstitutionality of the government’s Disbursement Acceleration Program (DAP), could sidetrack reforms.

"To be sure, the economy still has momentum going for it and is shielded to some extent from the political mayhem as remittance and BPO (business process outsourcing)-driven consumption growth can be expected to keep it chugging along as before," they said.

"Thus ... economic growth remains likely to continue, albeit below par."

The fund misuse issue could prove to be a roadblock for the government’s legislative agenda given Congress’ involvement, the economists warned. Likewise, as the scandal involves the use of public funds, the government may become more cautious in spending, raising the risk of unmet targets.

"The confusion over PDAF and DAP and their legalities appeared to have led to greater caution in fund releases, which may help explain the marked drop in government spending since August, compounding worries about underspending for this year and even next," the economists said.

"While falling below midyear deficit targets is not new for this administration, it had previously resorted to the DAP to catch up on spending by using unspent funds for other programs ... This time, even though typhoon relief and rehabilitation operations have created demand for legitimate spending ... we are unsure how aggressively the administration can use the DAP to catch up on spending."

The bigger concern, they noted, involves how planned changes in the budgetary process will affect fund releases.

"It may well be that this new system will minimize the risk of fraud and lead to greater confidence on the part of officials tasked to sign off on disbursements. But based on what happened when the administration first took over, a new system also risks a J-curve effect, where spending will first fall as new rules are internalized and kinks smoothened out," the economists said.

The devastation caused by super typhoon Yolanda, which battered the central Philippines last Nov. 8, will also be another test for the administration and a risk to business and consumer optimism.

"How the President handles the tragedy ... with millions of lives at stake and the world watching closely, can also spell the difference between his ability to continue governing effectively or losing credibility and becoming a feckless and increasingly lame-duck president," they declared in the report.

While the full economic impact of the devastation caused remains unknown, they said it would likely not cause growth to fall below trend, especially with government and aid-financed reconstruction activities helping to offset any contraction in affected areas.

"Indeed, while we had initially considered a downward adjustment in our growth forecasts due in part to what we thought was the government’s reduced confidence and budget flexibility to pursue catch-up spending, we now think that relief and reconstruction efforts in the Visayas will help make up for a portion of the shortfall," GlobalSource’s Mr. Bernardo and Ms. Tang said.

http://www.bworldonline.com/content.php?section=TopStory&title=%E2%80%98Trying-times%E2%80%99-to-weigh-on-growth&id=79513

Tragedy as opportunity

BUSINESS WORLDIntrospective

I HAVE just listened to Bank of the Philippine Islands (BPI) President Cezar Consing speak before the 51st Annual Meeting of the Philippine Economics Society. Far from the dry financial statistics-filled presentation expected of a banker addressing economists, he gave a stirring talk on how this national crisis can serve as an opportunity. I am pleased to share his remarks:

"So if the macro numbers can withstand Yolanda, what should we as economists be worried about? One only need watch the tragedy unfold on television, and be aware of our own gut response to what we see and hear, to know the answer. Our affected countrymen’s desperate search for food, water and medical supplies, the throng of people in the airport looking for a way out of Tacloban, the looting of public establishments, the almost complete absence of public utilities, is threatening to destroy the growing confidence that we as a people had begun to feel -- a result of the newly earned investment grade rating, the national government’s campaign against graft and corruption, and the exploits of Manny Pacquiao, Gilas Pilipinas, the Askals and Megan Young.

"As a banker, I keep an eye on two macro numbers. First, is our GDP per capita. I note that at $2,600 it is about a quarter of the average GDP per capita of countries with credit ratings equal to ours. Second, is our ratio of bank loans to GDP. I note that it is somewhere between 35% to 40%, about the same as Indonesia, but half of India’s and certainly much lower than most of the more developed Asian countries that have bank debt to GDP ratios well in excess of 100%. 
Amen!



"Two years ago, BPI Foundation, working in partnership with WWF (World Wildlife Fund) -Philippines, commissioned a project called the Climate Risk Adaptation Project to study the effects on key cities of extreme climate events. The study, completed in late 2011 but yet to be released, has proven to be remarkably prescient. The calamity that has befallen Tacloban proves that sometimes the academics get it right.

"So what does the tragedy that is Tacloban have to do with sustainable and inclusive growth? Everything I am afraid.

"Our country has demonstrated its ability to weather global economic storms -- note the 1998 Asian crisis, the 2008 Lehman crisis, and the 2013 Emerging Markets volatility brought about by the prospect of tapering. But I wonder whether we will be able to as successfully weather the crisis brought about by bad weather.

"Surely, from the standpoint of macroeconomic performance, the tragedy in Eastern Visayas is manageable. The region accounts for only 2% of GDP. With the budget deficit at only 2.3% of GDP, the government has the wherewithal to step up spending. In fact, while Secretary Purisima has indicated that the GDP growth rate in 2014 can be reduced by 1% as a result of the calamity, our economists in the bank think that 6.5% to 7% growth in 2014 is still very achievable. Even Yolanda’s inflation impact should be muted. Eastern 
Visayas accounts for only 3.5% of sugarcane production, and the rice reportedly lost is less than a hundredth of the country’s total annual production, principally because most of the rice had already been harvested. Finally, and ironically, rebuilding efforts should provide a GDP boost in 2014.

"If there is one theme underlying the haunting post-typhoon images of Tacloban, it is the severe lack of, or shortcomings in, public goods in all its forms -- power, water, roads, bridges, airports, hospitals, military transport vehicles. In fact, we should probably marvel at what has been accomplished in the aftermath of the typhoon despite the dearth of public goods, and for this the private sector deserves much kudos.

"As all of us intuitively understand, sustainable growth requires an ample supply of public goods. There are limits to privatization. Indeed, if profits were the sole objective of economic behavior, very little by way of public goods would be supplied. But provide a strong base of public goods, and the private sector will follow the money to provide the "oomph" that every healthy economy needs.

"Inclusive growth is probably even more dependent on public goods. The poor have less ability to pay as they go. A good baseline of public goods does more to improve the relative situation of the poorest amongst us than the richest amongst us. Indeed, the countries with the best public infrastructures tend to be the most economically inclusive.

"Tacloban has highlighted the importance of public goods, of hard and soft infrastructure, much more vividly than any economics textbook ever can. Tacloban is frightening because it could be any place in our beloved country. Tacloban is depressing because it reveals a chink in our armor, and rips away at our growing confidence that, as a nation, we are about to join the more developed countries in the region. Tacloban is infuriating because, by bringing to the fore the dearth of public infrastructure, it exemplifies the true cost of graft, corruption, and tax evasion.
"So having spent several minutes bemoaning our fate, what can we do to be constructive?

The conclusion one draws by looking at these two numbers is pretty straightforward. That is, as a country we are still quite poor and, as a result, most of our countrymen are not creditworthy by conventional banking standards. Indeed, 80% of Filipinos are still unbanked.

But if we as a people become a little more prosperous, if we can achieve a per capita income closer to, say, $4,000, a much larger percentage of us become bankable. This per capita target is achievable if we continue to grow at, say, 7% or more per annum and control our procreative impulses. And how do we sustain this growth rate? Given our growth trajectory, the answer must be infrastructure. Indeed, many economists cite infrastructure bottlenecks as potentially slowing down our current pace of growth.

"So it is our bank’s objective to participate in the PPPs (Public-Private Partnerships), assuming they can be structured and governed to justify the significant level of resources that must be allocated to almost every project. This caveat is critical and reveals the limitation of private sector infrastructure financing. There is no escaping the need for an appropriate financial return on private capital. Indeed, the private sector is a poor supplier of true public goods. These only the government can supply.

"Tacloban need not be an absolute disaster, its handling need not be a national shame. Tacloban need not derail our growing confidence that our country’s economic prosperity is attainable in our lifetimes. But if we are to regain our mojo, we must step up. Government must do more to provide the public goods that will be supportive of sustainable and inclusive economic growth. As a people, we have to learn to accept, and in fact champion, rigorous, unflinching campaigns to curb tax evasion, graft and corruption, and administrative incompetence, for how else can we afford what we have to afford? As banks, we have to get bigger, since only by getting bigger can we be truly supportive of the long term capital formation needs of our nation. If we can find it in ourselves to each do our part, we can use this tragedy, one of Biblical proportions, to step up as Filipinos, in firm control of what we can control, and on the path of sustainable and inclusive growth."

(Romeo Bernardo sits as board director of the Institute of Development and Econometric Analysis, Inc. and the Bank of the Philippine Islands.)

Political Economy of Reform During the Ramos Administration 1992-1998

World Bank Growth Commission Working Paper 39
By
Romeo L. Bernardo and Christine Tang

http://siteresources.worldbank.org/EXTPREMNET/Resources/489960-1338997241035/Growth_Commission_Working_Paper_39_Philippines_Case_Study_Political_Economy_Reform_During_Ramos_Administration_1992_1998.pdf

Being water secure

Business World, Introspective

WATER SECURITY is ensured only when long-term investment and financing for the sector are sustainably and efficiently done to meet the needs of a growing population, the economy and the environment. This was the clear message delivered at a recent forum on Water Security organized by Finex.

IFC Resident Representative Jesse Ang said in the forum that while the Philippines is not yet considered a water-scarce country, management of the resource needs to be strengthened. While former MWSS Chairman Dondi Alikpala concurred that there is no water deficit yet, former MWSS Administrator Dr. Lito Lazaro explained why: “With the improved efficiency of both Manila Water and Maynilad in reducing previously big leakages (non-revenue water) the gain to Metro Manila is almost like building a new huge dam.”

Dr. Lazaro was too modest to discuss the benefits reaped over 16 years of the highly successful “largest water privatization” in the world: the broad public welfare gains, not just in water security, but in environmental protection, health, and outreach to poor communities. In short, clean water made available to Mang Juan. As CEO of MWSS, he was one of the three architects, under the direction of President Ramos, who made this privatization happen. The other two were then DPWH Secretary and MWSS Chairman Virgilio Vigilar, and Mark Dumol, the Secretary’s Chief of Staff. I was a member of the MWSS Board as Finance Secretary Bobby de Ocampo’s representative, and consider myself fortunate to have had a big front view and a small role.

The success story of this privatization is objectively and engagingly told in a book Built on Dreams, Grounded in Reality (http://asiafoundation.org/resources/pdfs/Chapter4.pdf) by former UP School of Economics Dean and our only living National Scientist in Economics, Dr. Raul Fabella. Chapter 4, “The Privatization of MWSS: How and Why It Was Won” had this to say:

“The privatization of MWSS was clearly a triumph of the principle of comparative competence-the private sector proved more competent at the delivery of water and sewage services than the state. It is now considered a singularly successful structural reform in the annals of Philippine political economy.”

The welfare gains for the public is a matter of public record. In the Joint Statement on Water Public Private Partnership (PPP), the Foundation for Economic Freedom, the Management Association of the Philippines, the Employers Confederation of the Philippines, and Philippine Chamber of Commerce and Industries noted that the water PPP has “contributed much to improve public welfare by having more than doubled the number of customers served, provided 24 hour water service availability that meets health standards, while addressing the needs of millions in the poor communities. The improvements in service delivery came after the two concessionaires poured in a combined P105 billion in investments to expand and upgrade the water and sewage network, achieved without adding to government’s fiscal burden or public debt exposure.” They further lamented that it’s a pity that this “successful, internationally recognized model PPP has not been replicated outside Metro Manila where the water situation remains at pre-privatization MWSS standards”.

It is disturbing indeed that instead of building on this success and nurturing the greater water security achieved over the years, we now observe populist myopic demands, not just by the usual suspects from the protest industry, but by MWSS itself, for arbitrary reductions in water rates -- already the lowest in the country, and compare favorably internationally. This will inevitably compromise water security over the medium and long term as needed investments for maintaining service quality and protecting the environment are neglected.

The Japanese Chamber of Commerce and Industry was quite emphatic in this regard: “We view the MWSS’ unilateral and arbitrary act of changing the terms or interpretation of the concession agreement, in total disregard of the contractual rights and intent of the parties, with grave concern.” Such unilateral populist action by government agents is referred to in regulatory economics literature as “administrative expropriation,” a form of “government opportunism” inflicted on captive investors in utilities. (See e.g. Spiller and Tommasi, pp 515-543, Handbook of New Institutional Economics, Menard and Shirley, eds. 2005. )

There are a number of issues in the dispute notices that the two concessionaires submitted for international arbitration, ranging from the computation of the appropriate discount rate (allowed rate of return) to the disallowances pertaining to past and future investments, and incredibly, a reinterpretation 16 years hence, of treatment of corporate income taxes. As these are in the realm of a legal process, it is best to refrain from discussing these. One trusts that as had happened in the previous two arbitrations, all parties will abide by the final decision of the Panels, and move on from there to follow in good faith, the letter and spirit of the Concession Agreements.

The one item of contention that calls for comment is on who is responsible for investing in new raw water sources -- an key element to water security. The insistence of the current MWSS management that investments in such are excluded under the Concession Agreements, and therefore disallowed in the tariff rate setting, squarely contradict the intent of the Agreements. More fundamentally, given MWSS, and government’s, dismal track record in public service provision -- especially when contrasted with the two concessionaires’ -- such revisionist interpretation will certainly bring us back to pre-privatization water insecurity.

Mark Dumol, in a letter reproduced in the widely read column of Boo Chanco (“Did P-Noy accept excuses for infra lag?”, Philippine Star, June 26, 2013) was categorical on what they had in mind: “Without any doubt, the original intent of the MWSS concession agreement was that all aspects of the provision of potable water, from raw water sourcing to treatment to distribution would be the responsibility of the concessionaires.”

I also consulted Dr. Lito Lazaro on this and he said “in my mind it was clear that raw water development is the responsibility of the concessionaires. How can the concessionaires be held to their targets if they are not responsible for the raw water development, since complying with the targets assumes that water is available?”

I asked Dr. Lazaro why the Concession Agreements were not absolutely explicit in its provisions on this. He said the “main reason for this is that there were unsolicited proposals pending with the MWSS on most of these water sources” that there was need to protect the Agreements from legal challenges from such proponents claiming vested rights under the BOT law. In fact one such proponent filed a TRO to stop the MWSS privatization bidding; thankfully, it was thrown out by the courts.

This unilateral reinterpretation by MWSS, which now risks all the gains achieved in one and half decades, had Mark Dumol wondering: “Why has the MWSS voluntarily decided to take on this obligation which would require it to seek huge financing, hire a lot of staff for a Project Management Office, design and bid out the projects and then deal with big contractors and consultants? One can only guess why.”

Why indeed.

Romeo Bernardo was Finance undersecretary during the Aquino 1 and Ramos administrations, and board director of Institute of Development and Econometric Analysis, Inc.

Differentiated

THE BETTER-THAN-EXPECTED 7.5% 2Q13 growth certainly brought cheer to local stocks battered by two weeks of bad news. The main stock index rose a cumulative 6.0% in the past two days following the announcement last August 29 that the local economy bested other Southeast Asian countries where growth ranged from 2.8% (Thailand) to 5.8% (Indonesia) during the period.

Several foreign analysts have announced upward adjustments to their growth forecasts, bringing their full year numbers closer to our earlier forecast of 7.2%. The local economy’s resilience in the face of external turbulence reinforces our view that the Philippines is somewhat differentiated from its peers not only by having a structural current account surplus, fueled by remittances and BPO earnings, but also by having local growth drivers, mainly public spending and private investments, to lean on. The latter may be traced to local economic authorities’ ability to pursue accommodative policies given a benign inflation outlook and manageable public debt.

While we are keeping our 2013 GDP forecast for now, we anticipate the pace of growth to fall below 7% starting this quarter. This is due primarily to the disappearance of election-related stimulus and its impact on government and household spending. Moreover based on the just released numbers, we see some downside risks, including:

(a) Decelerating year-on-year consumption growth over the past four quarters. It is hard to tell at this time if the peso depreciation’s boost to incomes from dollar remittances can reverse the trend;

(b) Likely more timid spending by the government moving forward in the wake of the still-unfolding major multibillion pork barrel scandal;

(c) Dampened investor confidence due to recent financial market developments. 2Q13 data already reflect a significant slowdown in private construction -- from over 20% real growth since 3Q12 to just 9% last quarter -- and the BSP Business Expectations Survey, released August 30, reveals a less-upbeat mood for 3Q13. Expected increases in borrowing costs due to withdrawal of liquidity from emerging markets may dampen moods further;

(d) Weakness in imports, including of inputs to electronics goods, makes a convincing export recovery story still elusive, despite improving growth indicators in the US and China. The country’s export promise has in recent years switched to the BPO sector, which continues to show growth. In 2012, on a 30% value-added rule of thumb, the electronics sector pulled in $6 billion, about half of the $11.6-billion haul of BPO services.


2014 AND BEYOND

Will the country sustain the 7% growth trajectory in 2014 and next? Given the disappearance of one-offs (elections) in the near future and maturing business cycle, it is highly doubtful to maintain such feat. Moreover, recent delays in infrastructure projects may further derail the economy on its high growth track. On our part, we see above-trend growth for 2014 (6.2%), still outpacing other emerging markets, because healthy macroeconomic fundamentals and consumption will likely underpin growth in the future.

While our forecasts are a shade higher than the consensus, we share the view that growth will decelerate over time. The main reason is that despite being encouraged by optimism, we think that other than in real estate which analysts, including ourselves, estimate to be in it seven-year mid cycle, private investments particularly FDI will realistically be more modest than what the government is hoping for. To be sure, investors are trooping into town and the high registration numbers recorded in the country’s economic zones since 2010 reveal genuine intent to set-up shops locally. However, these plans will take time to complete and actual inflows as reflected in FDI numbers have yet to impress. Moreover, we are told that business park locators are starting to look into possible problems associated with the industrial zones’ absorptive capacity, not only in terms of space limitations but also congestion due to inadequate supporting infrastructure, notably in transport, ports and power. For instance, the energy secretary has warned that if growth stays on its current path, the Luzon grid would face supply tightness in 2015 particularly in the summer months.

Meanwhile, infrastructure PPPs continue to face delays, with bidding failures and push out of bidding schedules. In our view, this is due to, among others, over-cautiousness and underpricing of opportunity cost of delays at top level/s, lack of technical capability of implementing agencies, and misallocation of risks between government and the private sector. One example of the last is on risks arising from potential new local real property taxes on rail or airport assets. These are risks that should be born by government, based both on logic of efficient risk allocation (party that can best bear/manage the risk should carry it ) and on past experience where power and rail assets became the object of such form of “hostage taking” by local governments units. Surprisingly, the draft contracts for bidding load such risk on the bidders; unsurprisingly, no shows and further delays.

In another instance, perceptions of regulatory risks were heightened by recent populist public bashing by the agency-in-charge, echoed by a chorus of legislators, of a highly successful 15 year internationally recognized water PPP for Metro Manila. This became the subject of a statement of concern by four national business organizations, and is now inexorably headed for international arbitration.

With investors expected to increasingly fret about the outcome of the 2016 presidential elections, economic growth further out would depend in our view on government’s ability to crystallize a convincing follow-on story in support of the investment grade rating that investors can anchor their decisions on. This is emerging to be a truly challenging task in the current external environment and local political landscape. The latter is complicated by a serious “pork barrel” scandal, and the accompanying public disaffection and government distraction, with no clear closure in sight.

http://www.bworldonline.com/content.php?section=Opinion&title=Differentiated&id=76140



Part of this column came from GlobalSource reports entitled “Differentiated” (August 30, 2013) and “In a Good Place” (August 8, 2013), both written by Christine Tang and the columnist. Romeo Bernardo is a board director of IDEA. He served as Undersecretary of Finance during the Aquino 1 and Ramos administrations.