Business not bullish

January 6, 2017 at 14:05

It may be surprising that despite continuing good economic performance and prospects of maintaining the Philippine growth expectations, businessmen’s optimism for the future has seen a declining trend in the last two quarters.  One is reminded of the last years of Gloria Arroyo (after the Garci incident and her apology – I am sorry) when despite strong economic growth, business and the public were less than enthusiastic with her governance (basically on corruption concerns).  Definitely, the Duterte administration in terms of popularity is far ahead of the GMA term and is considered above even the Aquino administration in its anti-corruption efforts (the swift dismissal of the two deputy immigration commissioners despite being the President’s fraternity brothers in contrast to the non-action of then President Aquino on his shooting buddies).  Why are businessmen worried?

The populist stance of the Duterte administration is troubling.  Increases in the SSS pension will necessitate additional contributions from the workers and the company if the SSS fund is to be kept viable and the increase sustainable.  Free tuition in all state universities and colleges demands substantial funding beyond the present allocation of R8 billion and could impact negatively on the earning capability of SUCs as they become less entrepreneurial and give up their socialized tuition schemes where the more affluent pay more and the less privileged are provided allowances besides free tuition.  Moving forward, the Duterte administration may find it difficult to source revenues for what is expected to be a burgeoning budget for continuing free tuition.

An anti-“Endo” labor policy will adversely affect the ability of business to maneuver and meet the challenges of rapid changes in the global business environment.  It may even result in job losses rather than increase employment.  Lowering income taxes of the working class is laudable especially if the additional money in workers’ pockets will be spent and stimulate the local economy. Parallel decreases in corporate taxes will be needed to reassure businessmen that the burden of decreasing government revenues will not be shifted to them.

Other populist programs of the Duterte administration that will lower the cost of services to the public should be analyzed in terms of sustainability, effect on the fiscal situation of the government, adherence to the sanctity of contracts in previous PPPs and decreased budgets for other necessary programs of the government.  Infrastructure development is one area where more spending will improve the optimism of the business sector.

The presence of leftists in key positions of the Duterte administration also concerns businessmen.  The fear is that a pro-labor, pro-poor and pro-disadvantaged bias will scuttle projects that will benefit the economy that at the outset may just be providing employment to the community.  Cooperatives and associations may be favored over business enterprises in engaging in economic activities in the community, with “group capitalists” receiving more support than individual entrepreneurs. More seriously is the concern that these cabinet members will use their positions and their departments’ resources to strengthen their mass base for eventual control of local government and communities.  They may be preparing for a post-Duterte administration that will still ensure their continuing power and the propagation of their ideology and their own version of democracy.

While businessmen have gotten used to the tirades of President Duterte, the worry of its effect on trade and investment lingers.  The President’s posture may scare investors and stop other foreign customers from placing orders with Philippine export-oriented companies.  From a management point of view, the time and efforts wasted by cabinet members reinterpreting or restating the President’s at times provocative and controversial views will divert them from the more important task of running their departments.

A Duterte administration that recognizes the worth of business in pushing the economy; that business exists for the welfare of the workers and the community; and that business should not be viewed as an enemy will go a long way in making Philippine businessmen bullish about the prospects of the Philippines under a Duterte presidency.

Source: https://business.mb.com.ph/2017/01/05/business-not-bullish/