Monday, 26 May 2008
A Bad Investment
I am sure that most people in the Philippines know of Manila Electric company or better know as MERALCO. During the past few weeks, The Philippine Government Service Insurance System (GSIS) which owns a substantial share of MERALCO have decided to try to take over the company through a proxy fight. The GSIS President, the ever honorable bag of gas that is Winston Garcia, has decided that MERALCO overcharges its consumers and have mismanaged the company. GSIS invests money into MERALCO in order to turn a profit which is then used to pay for the pensions of thousands of civil servants.
The management of a company's number one priority should be to increase shareholder wealth. They are in fact owners of the company. To this effect, I believe that MERALCO's current management has held its end of the bargain. Only when the government has started to talk about a takeover is when the stock price began to plummet.
Hence, I am still VERY hesitant about investing in the Philippines.
Whenever government dabbles too much into the affairs of business, it ends into a tangled mess with politicians pocketing profits more than the shareholders. When a friend or a business associate asks me if I hold investments in the Philippines, I reply with a consistent "No."
I am sorry to say that the stock market has not fully matured. There are too many backroom deals with companies exchanging hands through a drunken night of mahjong. The corruption of government regulators is rampant and my confidence has continually eroded. Winston Garcia's current theatrics has added to the reputation of Philippine capital markets as being volatile and corrupt.
It doesn't end there. Several politicians have proposed that all text messages be free so as to alleviate the situation of the poor. The government should think long and hard before mandating this preposterous proposal. It would be another blow against private enterprise at the guise of helping the poor.
Then again, can anyone be really surprised?
Elections are coming soon and the dogs must be given their bone. Harsh reality. But sometimes we all need a reality check.