Business confidence will rely significantly on the credible output of the Independent Commission for Infrastructure (ICI), which is probing the widespread corruption stemming from shady flood control projects.

The probe must produce a result that is airtight in credibility, or else the economy will suffer. Economists who had earlier dismissed the effects of the political turmoil on the growth prospects are now expressing worry.

Trade groups would not take lightly any hint of individuals receiving special treatment from the ICI, particularly at the highest level of government.

The first concern of economists is the write-offs, particularly by government banks, of loan exposures in questionable projects.

It wouldn’t lead to any bank runs, but the government will have to provide capital to state financial institutions to meet international banking norms.

Investors want stability, not uncertainty. Nobody is asking for perfection, but the recent political upheaval has affected the already “minuscule” number of investors in the country.

The stock market, which reflects the sentiments of capitalists in the country, is down 18.9 percent since the flood control scandal broke out.

Economists said the country is highly vulnerable to sudden swings in investor sentiment, as the economy lacks a strong manufacturing foundation. Except for food processing, there are hardly any local industries.

Business process outsourcing (BPO) and remittance, which are key sources of earnings, can be easily scaled back in the event of uncertainty.

Another growth driver is government spending, which was misused in the construction of spurious projects.

Once public spending temporarily slows down due to the investigations into the anomalies, a hiatus in government spending is expected, which would further impact the growth momentum.

The hiatus will translate to a slowdown, which will worsen as investors will take it as a signal to wait on the sidelines.

European Chamber of Commerce and Industry (ECCP) Executive Director Florian Gottein said that European investors have taken a wait-and-see attitude.

“But we trust in the government and the responsible government organizations to investigate and immediately act on the findings,” he said.

Gottein said that much rests on the fact-finding by the ICI to resolve the scandal.

Several senators have been implicated in the mess, which added to the weight of the scandal on investors.

Gottein said the pullback in government spending is indirectly affecting some of their members who are involved in the production of construction materials.

Gottein said the resolution of the corruption outrage would have a significant impact on the free trade agreement negotiations with the EU, as governance is a substantial factor in the talks.

Two factors will be examined by the Europeans in the ongoing probe: how quickly the government and the responsible agencies can investigate the matter and then take the necessary steps, and the establishment of safeguards to preserve integrity in government.

Thus, the ICI has no cause to cover up those at fault, or the economy will suffer the consequences of such impropriety.

It must follow the trail wherever the investigation leads, as it has no other choice.