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"For developing countries with limited resources, we could probably do with a little less democracy"
Margarito Teves |
The Philippines’ secretary of finance, Margarito Teves, talks to Eric Ellis about his achievements and aspirations in keeping the economy on a stable growth path.
THE preferred office of Philippines Financial Secretary, Margarito "Gary" Teves is not to be found in the bowels of the Finance Ministry but in the heart of Manila’s business district, Niew Makati, on the executive mezzanine level of one of the country’s biggest banks.
For 65-year-old Teves, an amiable politician-businessman hybrid now three years in this important job, this is more than simply convenience and being closer to those most interested in his deliberations, Philippines Inc. In a country plagued by chronic infrastructural deficiencies, New Makati simply functions better than the creaking finance ministry building in the older Manila environs. Teves says that his ministry is having "electrical wiring" issues.
Plus ça change
Plus ça change plus c’est la même chose as foreign investors might rue in this vibrant but often difficult country with a booming, mostly Catholic, population that struggles to lift itself from the mire of inefficiency. The more that things don’t change, it is perhaps also rueful to note: Teves was once a director of Meralco, the capital’s monopoly power utility, which is at present embroiled in a corruption scandal that has also ensnared the lawyer of Mike Arroyo, husband of the embattled president, Gloria Macapagal Arroyo. None of this involves Teves, who is on the board of a number of other state companies. But as he pointed out to Euromoney in an interview at his Land Bank office: "Perception can be difficult to overcome".
Teves helped stabilize the economy in his first two years in office but what has also been difficult for him this year are the shocks from abroad: high oil prices and the US sub-prime-led slowdown. After posting 7.3% growth last year – among the highest in southeast Asia – Manila has been forced to twice downgrade its growth forecast for 2008. And, recently, Teves’ colleague, planning minister Ralph Recto, was announcing that GDP growth in the June quarter was the slowest in three years, just 4.6%. Manila needs at least 6% to maintain employment and spending.
It all puts further pressure on the Arroyo administration, which has seen off a number of plots to overthrow it, via rogue military elements and the mass "people’s power" that have toppled unpopular governments before hers.
You were a banker. Why did you take the job of financial secretary?
I was handling the Land Bank of The Philippines, and one event led to another, some people mentioned my name to president Arroyo. I was a politician before; I was in Congress. I had a varied career, sometimes in the private sector [working for one of the country’s biggest companies, Ayala Corp], sometimes in the public sector. I also set up my own management and political consultancy firm and I was brought back to government by the former president [the corruption-disgraced Joseph Estrada] to lead the [government-owned] Land Bank [of which he remains chairman].
How is the economy doing?
In terms of pure numbers, we are not as healthy as we have experienced last year. The GDP is slower this year, the first quarter originally registered at 5.2% but I understand there are some adjustments that might show a lower growth. Our estimate for the second quarter is also lower than 5%.
Your own original forecasts have since been lowered twice…
Yes. Officially it hasn’t been decided by the inter-agency [economic] group but the National Economic Development Authority said the numbers might be lower, so in a formal way this has been revised twice. The original growth rate was a range of 6.1% to 7.3%. Then we revised to 5.6% to 6.5%. Last year we grew at 7.3%.
What are the areas of concern?
The indicators that are areas for concern are inflation and interest rates. Inflation has recently registered double-digit growth and that is one reason why the central bank has increased interest rates. Exports are also showing some slowdown.
And the other pressure points?
So far the revenue collection has been relatively consistent with forecasts. The government expenditure side has been relatively slower than our programme and that is why we registered a deficit for the first six months that has been slower than our programme. The last two months already showed signs of spending according to the pattern that we wanted, a higher level, and it includes interest payments, investment in capital including infrastructure, and the operating expenses of the government. With the higher fuel prices, it’s normal for the government to experience sudden increases in operating and project costs.
What specific reasons have you identified as responsible for your downward forecasts?
The external environment. The slowdown in the US economy, and the world economy has also been affected. The higher fuel and commodity prices have contributed to double-digit inflation. This has affected consumer spending, and that has impacted on the growth in the economy. These are the two major determinants.
Is it just external factors at play?
Largely, but of course we have internal challenges. We’ve had setbacks. We’ve had severe typhoons and this has damaged our crops and our infrastructural facilities so agriculture has not grown as much as we expected. Commodity prices, especially rice, going up has also burdened the government and affected the domestic selling price of rice and other food. The weather impact and the global situation… there has been a tightening in the supply of rice available for international trade. This contributed to the higher prices. We are trying to move into a rice self-sufficiency programme.
Rice is subsidized in the Philippines, no?
A large component is subsidized and is intended for the very poor.
The Philippines is not the only country in the region to be experiencing these external shocks, and yet…