So far, NBN scandal has limited impact on economy - analysts

The political tension created by the furor over an allegedly padded government contract with a Chinese supplier has, so far, limited impact to the economy. But the overall attitude to the scandal is wait-and see, economists and analysts said. However, investors have warned that a protracted handling of the corruption allegations surrounding the $329.5-million national broadband network deal with China's ZTE Corp. could discourage them from pouring more capital into the Philippines. The contract was allegedly padded by $130 million to benefit former Commission on Elections chairman Benjamin Abalos and First Gentleman Jose Miguel Arroyo. Jae Jang, Korean Chamber of Commerce and Industry president, said uncertainties will make foreign businessmen doubt whether the country is a safe place to put their investments in. “For foreign investors, an unstable government will lead to dropping further investments," Jae Jang, KCCI president, told GMANews.TV. In 2006, South Korea was the third biggest source of foreign investment, after the United States and Japan. Korea invested $1.2 billion of the $3.5 billion in fresh capital that the Philippines received in 2006. Economist Cayetano Paderanga of the University of the Philippines observed that the for the past four years, the controversies that hounded the administration of President Gloria Macapagal Arroyo has had little impact to the economy. “The record of the last four years showed that usually political issues don't have long-term impact. We usually see the exchange rate to move for a while but then it will appreciate again and that is because of the remittances from overseas Filipino workers," said Paderanga, who is a former Socioeconomic Planning secretary. President Arroyo has been accused of poll fraud in the 2004 elections, and the diversion of P728 million intended for fertilizers to poll funds. “(But) this (NBN project) issue involved an investment spending program. Businessmen are more likely to be concerned on this than on the other issues. This is something that needs to be watched closely," he said. Paderanga also warned that other factors could work against the present administration such as the anticipated weakening of the global economy owing to the US slowdown. “The issue could wrap itself to fears of a US recession," Paderanga added. Jonathan Ravelas, Banco de Oro chief market strategist, said the stock market seemed to have taken the issue in stride, noting that it has yet to set an all-time low. “The market has not been shaken by these events. From what I know it suffered its lowest on January 22, days before this issue came out. It seemed that external pressure have more impact on the market than these political issues," he said in an interview. On Tuesday, Philippine share prices recovered , snapping a three-day decline, as investors bought cheap blue chip issues, analysts said. The 30-company Philippine Stock Exchange index jumped 27.42 points or 0.87 percent to 3,190.67 while the all-share index climbed 15.57 points or 0.81 percent to 1,949.21. Paderanga and Ravelas agreed that the best case scenario for the Philippines is for the economy to move forward despite all these issues. “The best case scenario is for the economy to ignore whatever happens- whether she stays or she goes and the worst case is that this will further complicate what is already a weakening global picture because of the US subprime crisis," Paderanga said. Ravelas, on the other hand, said that it would be better for the Philippines if the public just waits for the 2010 presidential elections. Last Friday acting Socioeconomic Planning secretary Augusto Santos, said the Philippine economy in the first quarter is likely to grow 7 percent, about the same level that it had for the full year of 2007 at 7.3 percent, the fastest pace in 31 years. The government is targeting to boost the country's gross domestic product this year by 6.3 percent to 7 percent. The projection was made despite the huge rally held on the same day by thousands who demanded the resignation of Mrs. Arroyo from the presidency. - GMANews.TV