Not feeling GDP growth? Lack of biz competition may be why, says Medalla

Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla | BSP official facebook page and website

MANILA  -The concentration of power in the country’s large conglomerates—alongside the limited amount of competition among these big industrial houses—is one of the factors that prevent more Filipinos from feeling the full benefits of economic growth, according to the head of the central bank.

At the same time, Bangko Sentral ng Pilipinas Governor Felipe Medalla said that it is the prospect of the failure of such a conglomerate that keeps him awake at night, explaining that these large corporations could potentially affect scores of Philippine banks from which they borrow funds.

“Because they’re so large, because of single borrower’s limits, they’re probably borrowing from 20 banks,” the central bank chief said during a forum at the Spring Meetings of the International Monetary Fund and the World Bank Group in Washington D.C. yesterday.

He added, however, that the central bank has conducted simulations which showed that the Philippine financial system is resilient enough to withstand the collapse of any single conglomerate, while many of these large family-owned business groups are, in turn, financially stable.

Discreet probe

The Inquirer learned that, last year, the central bank made discreet inquiries to banks with loan exposures to the companies owned by Davao-based businessman Dennis Uy, especially after one bank threatened to declare him in default for having missed payments on one of his firms’ lease contracts.

“It turns out from our own exercise that one large conglomerate is not enough to bring down the system,” Medalla assured. “But we’re not sure if three … ”

The outspoken, 73-year-old Medalla has served on the central bank’s Monetary Board since 2011, having been appointed by Presidents Aquino and Duterte. He is serving the unfinished term until July 4 of this year of Benjamin Diokno, who was named by President Ferdinand Marcos Jr. as his finance secretary. An opinion by a legal expert who helped craft the central bank law says Medalla and Monetary Board member Peter Favila are both eligible for appointment as governor despite having already served two terms on the policy-making body.

The central bank chief said that the fact is that most conglomerates are a double-edged sword for Filipinos as most are stable, but also translate to limited levels of competition that would otherwise translate to lower prices and better services for the public.

“The conglomerates have particular advantages,” Medalla said. “Sometimes that’s the complaint: That when gross domestic product (GDP) goes up, the typical person doesn’t feel it. So that’s always a very common complaint, not only in the Philippines, I think.”

“When people learn that I’m a central bank governor, they say ‘oh our economy grew by 7.5 percent but I didn’t feel it’,” he added. “Two out of three people I talk to feel that way, and I think they’re right.” INQ

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