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Show us the money.

AS we enter into the last two weeks of the year, we can look back on 2018 as a year that the Philippine economy weathered some storms and yet did come out ahead of the game.

The Philippine stock market is on track to end the year about 10-percent down from where we started, disappointing of course. Year-on-year economic growth was recorded as the slowest since 2015. The annual inflation rate will be at the highest in about 10 years. Base interest rates will also end the year at about the highest level in a decade.

While it is not a matter of balancing the positives and the negatives, it is a matter of judging the broad economic picture. It is always easy and even necessary to speak of wealth and income disparity and inclusive growth.

However, these are problems that might only be resolved through major structural changes. Further, we focus much deserved attention on corruption without acknowledging that systemic problems that make investing inefficient and ineffective are a form of 'economic corruption.'

The more important concern should be the underlying strength of the Philippine economy. Unfortunately, if you listen to much of the foreign commentary about our economy, you will not hear an up-to-date appraisal. The near hysteria about 2018 inflation comes even as prices are stabilizing and even falling and without mentioning the effect of the tax increases passed earlier this year.

Maybe then it might be good to 'follow the money.'

Unless you have been living in a cave, you know China has an unlimited supply of funds available for the Philippines. Of course the economy has not seen much of that lending in 2018. But we are told that it is only a matter of time before the Philippines becomes a 'debt-slave' province of China. Also, China does not care about the government or Philippine private companies' ability to repay any loans; it is all politics.

Japan, though, may want to lend money to nations like the Philippines and Indonesia to offset Chinese influence, or maybe not. The partnership between the Japanese government and its private sector has usually been supportive. Favorable lending terms have allowed Japanese companies to win contracts even if priced a little higher than its competitors. But for the Japanese, business is usually business and not politics.

The Japanese-led Asian Development Bank is also interested in lending money to the Philippines. The ADB announced last week that it will extend loans of up to $2.5 billion annually to the Philippines, or a total of $7.4 billion from 2019 to 2021, to support the government's 'Build, Build, Build' infrastructure program. This amount was more than double the bank's annual assistance from 2011 to 2017.

ADB's objective is to reduce poverty in the region through development assistance. While there might be a slight hidden objective of pushing Japanese and United States agendas, the loans are expected to be paid.

A new US law creating a government corporation that would provide financial assistance to low or lower middle-income countries could help with the Philippines's infrastructure projects. It is called the 'Better Utilization of Investment Leading to Development or BUILD Act.' Catchy name.

Billions of dollars are now available for infrastructure projects of the 10 members of the Association of Southeast Asian Nations. Certainly this is to help counter China's influence, but here also, the loans are expected to be repaid. Deadbeat countries are not encouraged to apply.
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Publication:Business Mirror (Makati City, Philippines)
Geographic Code:9PHIL
Date:Dec 17, 2018
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