Corporate Watch

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity…some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

A Tale of Two Cities (1859)
by Charles Dickens

It is a story of rabid hate — of the suppressed and hungry poor against the unfeeling French monarchy at the break of the 18th century. In the insanity of blind revenge the poor hunt down and guillotine every one of the royals in those years of the fearsome Reign of Terror. The superlatives of right and wrong, good and bad are claimed only by those in reversed power.
Zoom to today, and to us: the Philippines is in the best of times, according to the present political governance. Budget Secretary Ben Diokno said so, at the Euromoney Philippine Investment Forum last week, as he has always affirmed on many occasions.
In June, the confluence of rising inflation and depreciating peso alarmed even the ever-confident President Rodrigo Duterte. “The economy is in the doldrums,” he said (CNN Philippines, June 22, 2018). Incredible, how his own Budget Secretary Diokno immediately reacted. “You look at the facts, not impressions, not perceptions, but the hard facts and you’ll be convinced that it’s not the case,” he told a press conference (, June 27, 2018). Short of calling Duterte clueless, Diokno had to stand his ground, and root himself in the insistence that the country is in the best of times.
Presidential spokesman Harry Roque most loyally stepped in to save Duterte’s credibility. The “doldrums” statement was taken out of context, Roque said. The President was just emphasizing the need to fast-track the implementation of the “Build, Build, Build” infrastructure program (, June 25, 2018). Provinces are lagging behind in terms of progress and projects and the President is calling for charter change towards federalism because it will really provide the solution to the uneven distribution of growth, he added (Ibid.).
The Build, Build, Build and its tandem Tax Reform Program are the foundation for the so-called “Dutertenomics” for economic growth in the insistently-proposed federalist system of government. But even with Duterte’s admitted incapacity neither for deep economic analysis nor for instinctive gut-feel for doability of programs without coercion, his very academically prepared stable of economic managers, and in fact his whole Cabinet, should be able to fearlessly tell him what’s what in our country. Are we in the best of times, or the worst of times to do all these draconian changes?
All the propaganda for how well the country is doing, and how great is our President will have to be made effective only if there will be those needed participants and cooperators who will buy into the concepts and plans proposed. At the Euromoney Investment Forum last week, the speeches extolled the government projects, while the panel discussions seemed to cautiously avoid the elephant in the room — are we in the worst of times for investments in the Philippines?
“The much bigger concern for the economy over the long term…is a string of inflammatory comments and policy changes by Duterte that have raised concerns in the minds of investors over the President’s judgment and commitment to the rule of law,” Gareth Leather, senior economist at Capital Economics, said in its latest emerging Asia economics focus titled “Philippines: A two-year progress report on President Duterte” (The Philippine Star, June 27, 2018). Other silent analysts might agree that poor leadership and political uncertainty can hold back an economy.
“The biggest risk for the Philippines is that history now repeats itself. There are already signs that things are taking a turn for the worse. Since Duterte came to power, the stock market has underperformed, inflows into the country’s equity market have dropped, while pledges of foreign direct investment have fallen,” Leather said (Ibid.).
Might we listen to Dr. Gerardo Sicat, eminent economist and revered professor (program director) of economics at the University of the Philippines (author of the basic university textbook Economics), first Director-General of the National Economic and Development Authority (NEDA) under then-martial law president Ferdinand Marcos until 1981.
The overwhelming reality is high and continually rising inflation (6.7% in September), Dr. Sicat says. What worries him is that rising prices generally across sectors of the economy accelerate the problems of the most vulnerable, the poor and those whose incomes are not catching up with inflation (Gerardo P. Sicat: “Toward Philippine Economic and Social Progress,” The Philippine Star, Sept. 12, 2018). As we were taught in Economics 101, inflation occurs when an economy grows due to increased spending whereupon prices rise because of increased demand from more available funds. This makes the currency worth less than it was before, meaning more pesos will buy less goods and services, and the exchange rate weakens when compared to other currencies.
Dr. Sicat names certain factors that fueled the current inflationary situation: first, is the natural catalyst of high aggregate demand, specifically high consumption demand, funded by overseas Filipino workers (OFW) remittances and business process outsourcing (BPO) foreign earnings. These remittances are, ironically, enhanced by the falling exchange rate (more peso equivalent).
The second factor, perhaps equal to the remittances effect, is “the rise of overall demand (from) the growth of public spending, especially the rise in public infrastructure spending by the Duterte administration through its Build, Build, Build program” (Ibid.). Dr. Sicat pointed out what even unschooled intuitive economists know, that the funding borrowed for the ambitious, expensive government infrastructure programs will bring in even more inflationary effects. “The rise in government spending has signaled further a tolerance for a higher level of fiscal deficit which is targeted to rise to three percent of gross domestic product,” Dr. Sicat said (Ibid.).
The peso depreciation (third factor) will widen the trade deficit, as external uncertainties (fourth factor) like US President Donald Trump’s (self-inflicted?) trade wars and the global price increase, as well as rising US interest rates (fifth factor) will affect the Philippine economy, according to Dr. Sicat. But first, what must be controlled is the rising inflation burdening the people.
One wonders why the government does not seem to see that perhaps these are not the best of times to push for programs and projects like the Build, Build, Build and Tax Reform, and for political overhaul like the Charter change towards federalism. The brinksmanship of neglecting the urgent short term problems while lusting for long-term growth (for political legacy?) might not be tolerable for the queasy inclinations of the Filipino, an overwhelmingly middle-class to poor (about 70%) population of 105-plus million, in a country lagging in regional development.
Are we in the best of times, or in the worst of times?
Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.