Who?s next?
With the collapse of Lehman Brothers, the takeover of Merrill Lynch by Bank of America, and the financial instability of American International Group (the world?s largest insurer), the Philippine business community is on needles and pins.
The exact extent of the adverse effects of the US subprime mortgage problem has not yet been determined.
The affected companies are not expected to go public about their losses until they have exhausted all the means available to avert their closure.
The guessing game is on.
After two major players in securities transactions?investment banks and AIG?got burned, will credit card issuers, pension funds and other institutional investors not be far behind?
These investors purchase from and sell securities to the same market pool where the erstwhile icons in US investment banking made their living, and how.
The ?restructuring? of investment banks (the politically correct term to describe the recent Wall Street upheavals) practically leaves the lucrative field to Goldman Sachs and Morgan Stanley.
With their apparent success in insulating themselves from the subprime problem, financial analysts are on the lookout for any indication that they may go the way of their former high flying colleagues.
1997 Asian crisis
It will be recalled that a similar meltdown, although lesser in impact as far as the international business community is concerned, hit Asia in 1997.
The crisis started in Thailand and, within weeks, spread to the other countries in this part of the world.
The resulting pullout of direct foreign investments showed the vulnerability of the economies of the region to external financial forces.
There are reports that the currency run was initiated by a group of fund managers merely to test the reaction of Thailand?s capital market, but things got out of hand when other investment advisers followed suit.
The affected countries, the Philippines included, adopted strong measures to mitigate the adverse effects of the meltdown. Subsidies were removed, ailing banks were left to wither, imports were reduced and citizens were forced to bite the bullet.
Aside from the belt-tightening that marked the early months of the crisis, the thing that I remember most about that period was the human toll it exacted.
Unemployment went up. Thousands of Filipinos, Thais and Indonesians were forced to seek jobs in the Middle East to keep body and soul together. The social effects of that migration were tremendous.
Acceptance
The suicide rate in Thailand and Japan spiraled. There was a time when, during a three-month period, despondent business executives jumped with macabre frequency from skyscraper offices.
Alarmed by the situation, the Thai police were reported to have posted lookouts in ?popular suicide spots? to prevent a recurrence of those incidents. Mercifully, no Filipino businessman reprised their act.
There was, as expected, the usual growling about the tight money situation, poor business opportunities and all kinds of complaints that some people are known for if things don?t go their way.
Other than the verbal letting-off of steam, the general reaction was one of resigned acceptance.
Since the economic malaise was region-wide, they probably felt there was no point in raving and ranting against forces that were beyond their control. Who was it who said that instead of cursing the darkness, light a candle?
It?s a tribute to Filipino resiliency in adverse conditions, not to mention the strong support system that the family provides, that self-destruction was not considered an option by those who were directly and seriously hit by the 1997 Asian crisis.
Effects
No doubt, the economic meltdown in the US will affect our country, like all others that do business with it.
For starters, the effect is already being felt in the local stock market. Trading has been lackluster. Share prices have gone down during the past weeks.
Investors are worried about their losses. But that?s how the cookie crumbles in the stock market. Profits are not guaranteed. Prices go up or down depending on various risk factors.
Those who play the stock market know the rules of the game, so they have no reason to complain if their investments go south deeper as the financial problems of the US unravels.
The fact that the stock market is down, however, does not mean our economy is in similar dire straits.
As former economic planning secretary Winnie Monsod puts it, the stock market is not the Philippine economy. The stock trading results will have a minimal effect on the country?s overall growth.
The foreign exchange rate has been similarly affected by the US slowdown. The peso has depreciated against the US dollar.
But there is a silver lining amidst all these unpleasant developments: The prices of oil products have gone down considerably. And if the trend continues, the coming holiday season could be something to look forward to.
There?s nothing we can do about the problems that the American economy is going through, so let?s just grin and bear it. There is so much to live for in our country.
* * *
For feedback, please write to rpalabrica@inquirer.com.ph.
