Much has been made of the “early Easter gift” the country enjoyed last week, in the form of its first-ever investment grade rating from London-based Fitch Ratings. But the reaction was a bit muted from the Palace—and understandably so, since the ratings agency took pains to remind the reader where the credit really belongs:
“Improvements in fiscal management BEGUN UNDER PRESIDENT ARROYO have made general government debt dynamics more resilient to shocks. Strong economic growth and moderate budget deficits have brought the general government debt to GDP ratio in line with the BBB median.”
Everyone knows that this economic growth and fiscal prudence began under Mrs. Arroyo—everyone but, it seems, the Palace, whose spokesmen have the gall to issue their regular media statements under the heading “Daylight in the Philippines”. This insistence that President Aquino brought the sunrise with him to our poor benighted country reminds me of a Chinese Communist song from my activist youth that compared Chairman Mao to “the sun that forever shines”.
Lest our children start having bad dreams about Aquino’s bald visage beaming benignly down at them from inside a yellow Philippine sun, let’s deconstruct Fitch’s investment-grade rating so it doesn’t become more grist for the Palace’s tireless propaganda mill:
• The other institution singled out for praise is the Bangko Sentral, whom Fitch rightly credited for its “inflation management track record and proactive use of macro-prudential measures”. Ask any BSP senior official from the governor down who they think should be credited with initiating the reforms that led to our credit upgrade. But don’t expect them to be quoted for the record. They’re still fond of their jobs, and they’re perfectly aware that the central bank’s nominal independence—like that of so many other beleaguered Constitutional bodies—wouldn’t stand a chance against our impressively vengeful President.
• Where Aquino gets a nod from the rating agency is his widely-hyped good governance program, in this classic piece of British diplomat-speak: “Governance reform has been a centerpiece of the Aquino administration’s policy efforts. Entrenching these reforms by 2016 is a policy priority of the government.” But what exactly are those reforms? How can they be evaluated if they aren’t even mentioned? Can it be that the credit rater, being a true professional, simply couldn’t find anything worth citing in detail?
• The only fiscal achievement that the agency credits specifically to Aquino—one that didn’t involve simply riding on the momentum he inherited from Arroyo—is his sin tax law, which is his version of Arroyo’s bold EVAT reforms. But how much of the expected billions in additional tax take will actually be collected when our local smugglers really get serious with what is already the world’s most smuggled commodity, cigarettes? And how much can they be restrained by an administration that has already seen smuggling balloon from an average $3 billion annually under Arroyo to nearly $20 billion annually after only two years under Aquino?
Perhaps the most important thing to remember about this credit rating upgrade is this: At the end of the day, it really matters only to professional portfolio managers who may be restricted from putting their money in non-investment-grade credits. Even with its shiny new investment grade, the Philippines will still have to compete with its new peer group for portfolio attention. And direct foreign investors—the ones who really bring in the jobs—will be totally unimpressed since they’re concerned with an entirely different set of issues altogether.
The new rating—like any other credit rating—speaks only to the country’s ability to repay its foreign-denominated debt, nothing more. It says less about whether or not equity investors can expect to earn the right returns on bricks and mortar on a level playing field. And it says nothing about whether we are investing properly for future growth, or creating more jobs through the right kind of growth, or improving our productivity as the only way to sustain long-term growth.
Unfortunately, like most early gifts, the packaging may be nice and glitzy—as the Palace will try to hype it up—but what’s inside is not what we really need.
My wife and I enjoyed a more personalized early Easter gift during our Holy Week vacation in Dapitan, where we stayed at the sumptuous pension Alexandra by the Sea, named after the daughter of its owner and hostess, Judith Pajaro of “Via Firenze” designer-brand fame (0917-8800823).
It was our very first time to visit the Zamboanga region, and we thoroughly enjoyed the peace and quiet by the ocean, the roadside “kan-anans” where we feasted with large noisy families on kilawin, grilled fish and guyabano shakes, the musty old cathedral where Rizal must have attended Holy Week rituals over a century ago. For the first time ever, I heard the sing-song chant of the Passion of Christ from the Gospel of John in the traditional three voices—first in Cebuano at the cathedral, then that night in the original Latin in a very moving Good Friday telecast from the Vatican.
In one memorable encounter, the tricycle driver who drove us to church confided that he was a transplant from Manila who missed the big city but wouldn’t leave Dapitan, for one reason alone: his children could go to school all day there, and were learning a lot more for it. If you were to ask him which alternative solution would make him happier—having fewer children, or having more classrooms for them to study in—I don’t doubt what his answer would be. A sobering thought indeed as we come out of the Lenten season.
It’s at the street level where you find out what really matters to the hardworking people who are the salt of the earth of these beautiful, sea-drenched, sun-kissed islands. In the end, it always comes down to the children, of whom we can truly never have too many, no matter what this President says.