High Anxiety

Over the past few days, a number of friends and column followers have been asking me on the right thing to do as some people see the world markets collapsing and how sub-prime loans will affect us in the Philippines. I did touch on the subject a few weeks ago where I mentioned that the issue may have limited impact on enterprises as our general economic fundamentals are solid and only a few financial institutions have insignificant exposures to those instruments. However, what we now see is a roller coaster ride on the market as some global and local investors are a bit more careful but are still in selected safer investments. The Philippines has gone thru the Asian crisis and a lot of banks have been very strict in lending. Not helping the situation also were new scams that unfolded such as the Francswiss and the Performance Investments Products Corporation (PIPC) that victimized a lot of wealthy Filipinos.

Let me share with you the views of well known economist and finance expert Romeo Bernardo, who in the past was a bit pessimistic about the Philippine economy and is now quite bullish. In his paper, together with Marie-Christine Tang, published at The Global Source, he cited the “relative political calm and improved macroeconomic fundamentals as good combination that may enable the economy’s growth pattern to take on a more Asian character, (i.e., a more extended period of high growth). At the center of the current growth story (6.9% for the first quarter of 2007) is the growing remittance inflows from over 8 million OFWs, which has benefited the balance-of-payments picture and contributed to the Pesos’ continuing strength. Remittance inflows posted a compounded annual growth rate of 11% in the last 10 years to 2006 and comprise over 10% of GNP in the first quarter of 2007. According to the report, these income flows have been driving not only consumption growth but also investments in housing and deepening of financial markets as new savings and investment products aimed at capturing more of these flows, have developed.

Another factor that contributed to a good run are the recent high profile investments (e.g. purchase of Mirant Philippine assets for $3.2 billion by Tokyo Electric/Marubeni, $1 billion investments of Hanjin in shipbuilding, Texas instruments $1.8 billion) suggesting improved business confidence. The private sector has also started to increase its manufacturing capacity (75% capacity utilization for Jan-May 2007) after a decade of low investments. The government’s improved tax collection efforts also significantly improved primary surpluses and the government is expecting revenues from some upcoming asset sales (e.g. PNOC, SMC, FTI) that will offset the P48 billion revenue shortfall.

The other day I also invited Vinci Zaragoza together with some trustees of the Philippine Center for Entrepreneurship hopefully for him to support the Go Negosyo advocacy and shed light on what is happening in the world markets. Vinci Zaragoza is an esteemed investment banker based in Monaco who now runs his own pension fund of about USD 400million. He put up one of the first discount brokerage firms in the world, ViZa International and worked as a consultant for Swiss Bank International and Pension Fund, a company he has put up to pursue his first love, which is funds management, while financing various films once in a while. He also organizes the Monaco Film Festival, an activity which helps to raise funds for war and poverty stricken countries like Oman and Iraq.

What was good to hear from Vinci was that while the markets will remain volatile, he said that the central banks of the world will not allow the banks to go bust and that he sees a lowering of US interest rates and the continued support to create liquidity. In the end, the markets should recover.

I think the benefit for the Philippines is that the fourth quarter should be good and we should end with a record close in the index far better than last year. People should know how to invest in the markets specially stocks and bonds and not just join the band wagon just because everybody else is investing. They have to be very selective. While the markets have corrected, one can come in gradually and either invest on reputable stocks or funds, but perhaps trading daily so that one can average out the entry cost. The time to come in is now but gradually.

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After the successful caravans in Cebu, Bacolod and Baguio, Go Negosyo is continuing to spread the entrepreneurial revolution. Next stop is Go Negosyo sa Manila on September 7 at the Philamlife Auditorium in UN Avenue where we hope to gather over 1,000 Manileños who are in pursuit to learn and be inspired to become entrepreneurs. As with the other caravans, we are also going to award the most inspiring entrepreneurs in Manila which is not an easy task since Manila is known to be the birthplace of the country’s most successful businesses. Go Negosyo caravan will proceed to other key cities/provinces all over the Philippines. We will also be going to Pampanga on September 20, Quezon City on September 28, Cagayan de Oro City on October 19, Makati City on November 9, Binondo on November 16, Batangas City on November 23, and finally in Pangasinan on December 7.

Those who share our vision and advocacy to spread the good news and a mindset of entrepreneurship around the country, please don’t hesitate to join us or partner with us to make these efforts truly successful, and help make this country move forward.