Among politicians credit rating upgrade likely to create opportunistic actors
CEBU, Philippines - Just 12 days before the 2013 midterm polls, an international economist projected that politicians will take advantage of the latest investment upgrade of the Philippines to implement rules and maintain a system that would further satisfy their egocentric attitude.
Over a month ago, the country has bagged its first-ever BBB- investment grade rating that was granted by New York-based Fitch, citing resilient economic growth, stable inflation, healthy external payments position and improved fiscal reforms.
International-based public choice economist Dwight Lee said that the government could view the positive turn-out of the better credit rating as “opportunistic actors who are unlikely to be personally concerned with the economic growth of the country or the social welfare of their citizens.”
“They, the politicians and those in power, will design the rules of the game, legal and otherwise, to maintain a system that reward them and further their self-seeking behavior,” he stated.
Professor Lee is currently the chair of William J. O'Neil Chair Global Markets and Freedom at Southern Methodist University in Dallas.
He cited that an investment upgrade given by rating agencies to a certain country would mean easier credit and lower cost of borrowing for the government and a cheaper source of funds that can be used for government spending.
He added that such credit worthiness could lead to more foreign investments as it could entice investors to reassess the risks and rewards of business opportunities in the country and may eventually encourage them to expand.
He said that at present, the Philippines competes with other countries for the limited supply of investment funds in the global market.
To stay ahead of the game, he said that the country could typically offer inducements such as tax breaks and duty free importation to prospective investing companies.
Lee further noted that in the general perspective, the economic growth in any country should lead to an objective and rule-based enforceability of contracts, an open market place, and access to capital where, products, ideas, and innovations could satisfy and retain international and domestic customers while earning a fair return.
“The question that is worth asking is whether the recent growth in economy of the Philippines has caused the rating agency to reassess the Philippines or the other way around,” Lee concluded.