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The Confidence Forecaster

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Two years since assuming his current role in the PSE, Hans Sicat has reason to exude confidence. The investment banking veteran is overseeing a stock exchange that is breaking records and making headlines thanks to the economic doldrums besetting the developed world.

In this exclusive interview, Sicat shares a very helpful assessment of the ongoing real estate and property development boom. According to him, it is not an asset bubble comparable to what plunged the US, Japan, and the EU into recession. “The difference is the Philippine banking sector is highly capitalized and there has been a move by the Bangko Sentral ng Pilipinas (BSP) to make them comply with the Basel III standards,” he said. Sicat added, “The bankers and developers argue that the supply has not yet been met.”

After addressing topics as varied as institutional reforms within the PSE and improvements made on its security features, Sicat agreed to a brief interview with China Business.

A lot of hype surrounds the much-used phrase 'sound macroeconomic fundamentals.' What does it actually mean in a nutshell?

We have to credit the Bangko Sentral for having started, and over time implemented, a very good inflation targeting regime. It basically has gotten interest rates and inflation under control, with interest rates at a low level. The low level of interest rates now is fueling a lot more activity, as capital is a lot more affordable for businesses to take advantage of.

To me, to distill the one thing behind our success is the great effort under the leadership of BSP Governor [Amando] Tetangco Jr. He's not credited as much, but he's the primary reason for its top performance.

You're a close observer of what is happening in the Eurozone. Are its economic problems the reason for our stellar GDP growth? Are we now the last safe haven for investors?

Unfortunately for the Eurozone countries, the answer [to the first question] is 'yes' on a risk/reward basis. It's unfortunate we're taking advantage of that. So we're doing pretty good. What I keep telling policymakers is that this should basically lead us to a situation where we are preparing for the time when everybody is normalized. We should prepare for the time when everybody's on an equal footing.

With all this momentum on our side, what steps should the country take to stay competitive?

I think our own corporate sector is demonstrating it's able to compete around ASEAN with the breakdown of tariffs and other barriers. Number one, I think it's a very good first step; it tells you that people are willing to compete internationally and not rely on government protection. That's one important thing. Number two, on a policy level, our policy should be geared to be user-friendly and investor- friendly, so now we take on investments more productively. More importantly, when I say 'user-friendly' I mean more or less on par with the rest of the region. It's the operating environment that our companies should get used to. What they face here, they will face in ASEAN and the rest of Asia.

For the longest time, looking at the last 40 or 50 years of history, we've had policies that protect certain industries. But once you're opening the door, they complain, “I'm not being protected anymore.” They're never growing up. Like a kid who doesn't want to go out in the world.

The UK's former Prime Minister Gordon Brown said that protectionism is back in vogue. Your thoughts?

That works short-term but not in the medium-term. It compromises your overall competitiveness.

Will the BPO sector remain strong?

We're definitely a leader. It's not just on the cost issue where we're leaders. We're a player in a wide range of activities. I think the ability to demonstrate and communicate to other global corporations all the development here in Taguig, a lot of that is slightly more expensive here than another place, but the reality is you get better delivery. Yes, we do offer a wider menu. That's how we should compete.

Print ed: 06/13


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