- Constitutional crisis: The Arroyo government was close to impeachment in recent weeks, and though it looks like she will have a reprieve, a strong consensus emerged for reform. The Philippines is considered the 2nd most conrrupt country after Indonesia in Asia.
- New cabinet: During the crisis, Arroyo moved to appoint several ministers who were well received by the Makati Business Club. eg. New finance minister, etc
- High oil prices: The Philippines is strongly dependent on imported oil. This dependence has eroded government activity.
- Expat income: The Philippines has the good fortune of having some 5mil expats working overseas, mostly in the USA, Japan and the Middle East. In times of crisis these Filipinos repatriate more funds to the Philippines.
- Terrorism: The Philippines comprises 3 island groups. The southern island group of Mindanao/Sulu hosts a large number of Muslims, some of whom engender extremist views - the Abu Sayef - and resort to kidnap and ransom demands, assasinations and bombings of key infrastructure. Their activities have impacted on investment in the Philippines and the southern islands in particular.
- Values: The Philippines has embraced the worst elements of western thinking - populist democracy, Catholicism and the hypocrisy that accompanies such subjective values. This aspect of the Philippines remains the most enduring and the most scary. Chile proved that it can be done - though it did not have the same democratic foundation given that Pinochet maintained control of the military.
- Investment potential: The Philippines remains (along with Indonesia) the poor bed-fellow in Asia. There are 3 sectors of the Philippines economy that hold particular promise:
a. Mining: The Philippines is very rich, so is likely to benefit from a future mining boom. It will be greatly advantaged by expat miners returning home.
b. Tourism: More than most countries in Asia, the Philippines offers an attractive archipelago for developing tourist resorts for Asians. Part of the appeal is the allure of the Filipino, though improvements in diet, infrastructure, service, security and safety are needed.
c. Property: There are currently significant constraints on foreign investment in property in the Philippines. Foreigners are for pure investment purposes are only allowed to invest in condominiums starting from $US40,000.
In recent weeks the Peso has fallen to P42 against the $A and $56 against the $US. Uncertainty over the constitutional process and higher oil prices and the collapse of Asian exports can be expected to see the peso trade lower in future, but that will present an attractive buy opportunity.
- Andrew Sheldon www.sheldonthinks.com