RP readies worst case action plans on US bailout failure

10/02/2008

The National Economic Development Authority (Neda) and the Department of Trade and Industry (DTI) yesterday claimed that the economic team has readied worst case action plans in the event of a US bailout failure that would impact on the country’s economy, yet they failed to disclose even one plan of action.

The economic team managers met yesterday to identify measures and action plans set for positioning depending on the developments in the world market.

DTI Secretary Peter Favila said there is recognition in the international scene that too much is at stake for the world economy and that the US has to act fast.

It was noted, however, that there was no disclosure of the claimed planned measure and actions, even as Favila clarified that with this development in the US financial bailout, the Philippine government will be in the best position to be very careful of its moves and to

refrain from making untimely announcement of planned measures.

Favila painted a scenario where the Philippines experiences the domino effect following a US bailout failure, which he says will impact on the country, claiming, again without disclosing, that the economic team has come up with projections on the worst-case scenario as well as the middle- and medium- scenarios.

Neda director general Ralph Recto said that based on the conference call conducted with some international institutions and with economists, the conclusion arrived at was that the recession in the US is not far-fetched. “In a worst case scenario, where there is no bailout from the US Congress and the system fails, this will all lead to credit crunch in the US and there will be no credit facility available for business and and industry. The equity market will collapse,” Recto explained, but as all Malacañang aides do, said that President Arroyo is on top of the situation to discuss the measures that have been identified in a worst case scenario.

He added that a meeting with the President and the economic managers will discuss in detail the plan of action.

“We have laid out scenarios that could happen in the light of whatever is in the US bailout,” Recto said, adding that the next step is to discuss the action plan in detail with the President.

In the US, White House contenders Barack Obama and John McCain were to hurry back to Washington Wednesday for a Senate vote on an economic bailout package convulsing both Wall Street and Congress.

Campaign aides said the two senators would take part in the evening vote after the House of Representatives sparked turmoil by rejecting the original package.

Senator Joseph Biden, Obama’s vice presidential nominee, was also returning to Capitol Hill, aides said after a day of angry barbs between the two tickets trading blame for the emergency bill’s failure in the House Monday.

Obama noted the bill’s failure had triggered a bloodbath on world markets, with $1.2 trillion wiped off New York share values alone Monday before a partial rebound Tuesday.

That was not just a crisis for Wall Street, but for millions of US workers with a pension investment and small companies reliant on lines of credit to stay in business, he said Tuesday in the battleground state of Nevada.

It was an “outrage” that taxpayers were having to foot the bill for financiers’ folly, Obama said, but stressed that without action by Congress, “millions of jobs could be lost, a long and painful recession could follow.”

“There will be time to punish those who set this fire, but now is the moment for us to come together and put the fire out.”

“Congressional inaction has put every American and the entire economy at the gravest risk,” McCain warned, citing individual companies and student groups now struggling to get loans because of the credit crunch.

Both Obama and McCain have said they will vote for the bill, which would allow the government to buy up to $700 billion in bad, mortgage-related debts from financial firms endangered by the collapse of the US housing market.

Backers hope a successful Senate vote will prod the House to come on board, with both McCain and Obama stepping up their appeals to party colleagues to put the risk of economic disaster ahead of their own misgivings about the bill.

Some lawmakers expressed cautious optimism about winning over House rebels in a second vote, after both Obama and McCain called for federal deposit insurance for US bank accounts to be raised for the first time in 28 years.

House Republicans want less direct intervention from taxpayers, and more indirect support from the government through such insurance schemes.

For his part, Speaker Prospero Nograles yesterday said the US financial conflagration can be turned into an opportunity by the Philippines especially if it is constitutionally equipped to attract American investments which are now relocating to safer grounds as he revealed that his resolution which calls for the lifting of the equity restrictions in the Constitution is rapidly gaining ground in the House of Representatives, with 160 congressmen now enlisted as co-authors.

Nograles said the government should launch an aggressive campaign to bring in more investments in the Philippines as US investors are either holding their assets back or are re-channeling them to safer grounds.

“Our strong economic fundamentals should be our best selling point in offering refuge to relocating American investments. However, we cannot maximize our potential as an attractive destination for investments which are now relocating out of the US because of our equity restrictions,” he said.

Nograles stressed that now is the best opportunity for the government to also encourage US-based Filipinos to invest their dollar-denominated savings in Philippine industries like mining and agriculture.

“The trend in the global money market is focused on the more stable gold and other mineral-based investments,” Nograles said in the wake of the current global financial turmoil spawned by the crisis in the US financial market.

The Speaker is optimistic that government could devise a comprehensive investment program for US-based Filipino migrants that would inject vigor into the country’s mining and agricultural sector, particularly in Mindanao.

“Our economic managers should be able to take the crisis as an opportunity to mobilize the country’s sleeping potentials and not just remain in the defensive posture,” the House leader said.

“Overseas Filipinos, especially those working and living in the United States should look at their home country as the best haven for their savings that could be transformed into active investments,” Nograles said. Riza Recio, AFP and Tribune wires

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