THE meltdown in the financial markets in the US and Europe has had little impact on us so far. But two who predicted this meltdown (Roubini and Taleb) are predicting further problems. Roubini says that $1 trillion have already been written off because of this financial crisis but there are still another $ 2.6 trillion waiting to be written off. His advice for those in the stock markets abroad is to keep in cash for the present. Our stock market has been contaminated but only indirectly. The drop in prices in Philippine Stock Exchange is not from intrinsic weakness but only indirectly affected by the lack of confidence in the international markets. But just the same the advice locally will also be to keep in cash. The blessing in this is that those with money may want to look into direct investments. There are so many opportunities in agriculture and housing that are awaiting investors in this country.
In agriculture, the investors in plantation crops are scrambling to expand their acreage, especially in bananas, with the banana craze in Japan and the increasing demand for bananas in the Middle East, especially Iran. The small and subsistence farmers are also waiting for financing for their inputs with the good prices of corn, cassava, and even sugar. There is every reason to make time deposits in rural banks who lend to farmers. OFW money and OFW savings could be making good returns with the rural banks. (The Legacy banks were unfortunate because their problem did not come from regular rural bank operations but from a scammer who bought and gutted them.) The time deposits in most rural banks can earn 8% to 10% p.a. interest compared to 3% or 4% p.a. in the commercial banks.
In housing we are way behind in providing decent shelter for our people. Gawad Kalinga of Couples for Christ and Habitat have shown the way but they can address only a small portion of what can be done. Cuba did a lot of self-help housing. Commercial housing companies like the Villar companies and others can make a big contribution. The big multi-story buildings in Global City are signs of construction industry recovery but what we really need are housing for homes and the construction of roads and other infra structure like bridges. The government is now flush with money after paying off most of the debts from the Marcos era. And besides there is money the government can borrow internally as shown by the large over-subscription of the 7% bond recently issued by the Banko Sentral. As long as we borrow from within our own economy, and not externally, such borrowings will not cause problems. Government should borrow more through government bond issues to push infrastructure construction projects.
Some recent statistics show that only about 4% of our economy is from external trade which isolates us from worldwide turmoil although we are affected indirectly as for example the shutting down of some computer manufacturing because of slow down in demand. We are also affected but only slightly by problems of the big banks like Citi, Bank of America, Lehman Bros., and others who operate in the Philippines even though their Philippine operations are doing well. They say that if the US catches a cold, we get pneumonia. But this does not seem to be the case in the present crisis. In fact the effects of this melt down will probably be felt here near the end of the year when the meltdown may be on its way to recovery. What has insulated us now is that we destroyed our industrial economy a few years ago by plunging into globalization demands, some say foolishly, from pressure from the big economies. Now that the developed countries are being affected, they are singing a different tune, that of protection. emeterio_barcelon@yahoo.com
