Economist Nouriel Roubini, who foresaw the US recession that stemmed from a busted housing market, yesterday turned cheerleader for the Philippines, heaping praises on the country’s fiscal and monetary policies and declaring the erstwhile sick man of Asia “an economic success.”
Mr. Roubini, in Manila for the Philippine Investment Summit 2013, said the country was ready to be fully integrated into the regional economy under the planned ASEAN Economic Community.
“The economic fundamentals of the country have vastly improved. And you see the results in terms of overall growth, low inflation, low fiscal deficits, low stock of public debt, positive external balance, low external debt, the performance of equity markets and bond markets and of the currency,” he told an exclusive press roundtable.
“It’s already reflected markedly in the economic success of the country and therefore this country is competitive. It’s flexible, it has a diversified economy, can compete in a wide variety of sectors. [I]ntegration and opening, the furthering of it, can only be beneficial to the country over time.”
 |
| Photo from First Metro |
The policy priority should be capital formation if the domestic economy is to grow at a sustained and high rate, he said.
“The most important thing for the Philippines right now to sustain this strong economic growth and continue it is that there has to be an increase of the investment ratio as a share of GDP (gross domestic product).
“Part of it is private investment and the private sector is active in doing its own share. Part of it is public investment that needs to be done to build the infrastructure that’s needed for increasing the productivity of the private sector. Some of this will occur through public-private partnerships.”
Emerging economies like the Philippines should employ a sound policy framework in managing inflows and outflows, he also said, noting this was already being done by the Bangko Sentral ng Pilipinas.
“In the case of the Philippines where the budget deficit is already quite low and where interest rates are low, the source of the inflows is not excessively expansionary fiscal policy. It’s actually the economic success of the country. And that’s where the macroprudential approach is the appropriate one.”
Asked whether the strong peso was healthy for the economy, he replied: “Things are never black and white. When economic fundamentals of a country are strong, you have high growth, where returns to investment are high given the profitability of the corporate sector, where you have a current account surplus, then those are factors that tend to strengthen the currency.”
“That part of currency strengthening is fundamental, is justified, and actually a country can live with it,” he added.
“In deciding whether to intervene and how much to intervene, the consistent approach is one of saying that if the equilibrium value of the exchange rate is appreciated, we’re not gonna fight it. But maybe if there’s excessive volatility of the exchange rate we try to smooth to some degree of intervention or other measures, prudentially. That approach has been taken by this country and it’s a sensible approach.”
Mr. Roubini also said overseas remittances were a “significant positive” for the Philippines, considering that inflows did not stop at the height of the financial crisis unlike in other labor-exporting countries.
There is nothing fundamentally wrong with the country being a service exporter. “The right thing to do is to think about your comparative advantage. Exports of services have led to success in places like India and the Philippines ... There is nothing in exports of goods that make them better in principle than exports of services,” he said.
“You can produce lots of goods very cheaply if your wages are damn low. But being stuck in low-value-added production of say, t-shirts, is not a source of long-term economic growth.”
In his speech during the summit, Mr. Roubini noted the Philippines’ gains but added that “a lot of work still needs to be done”.
Competition must be introduced to address monopolies and oligopolies, and the economy must be made more open to foreign direct investments, he said. Capital markets must also be deepened and liberalized, and the public-private partnership program executed on time.
“What are the concerns of foreign investors? Corruption, the rule of law, the sanctity of contracts, the ease of doing business,” he noted.
University of Asia and the Pacific economist Bernardo M. Villegas backed Mr. Roubini during the panel discussion and lambasted the country’s “Filipino First” mentality.
“We are still so antagonistic towards foreigners. We tell them ‘welcome,’ but they cannot enter even by just 1% in education and media, and then 40% for others,” Mr. Villegas said.
The 1987 Constitution limits foreign ownership, to various degrees, in areas such as the exploration and development of natural resources, public utilities, educational institutions and mass media.
Last August, President Benigno S. Aquino III ordered economic managers to review the merits and implications of revising the Constitution and relaxing foreign ownership limits. The study remains unfinished and officials have said the issue had fallen in the Aquino administration’s priorities.
Finance Secretary Cesar V. Purisima defended the delay, especially since the moves were being made in a “political space.”
“There is no debate on the benefits of foreign direct investments, but the question is timing. When is the right time to embark on this politically contentious process?” he said.
“There are other things to improve on first in the economy. Other industries are open to FDIs anyway, such as mining.”
The Philippines has attracted the least FDI in the region. According to International Monetary Fund data, the country lured a total of $25.59 billion in 2011, well below neighbors Thailand ($146.12 billion), Indonesia ($185.804 billion) and Singapore ($617.922 billion). -- with a report from D. C. J. Jiao
BusinessWorld, January 31, 2013
No comments:
Post a Comment