“The numbers are indeed glaring: over the last five years, we averaged only $70 billion a year in merchandise exports, while Indonesia earned $182, Thailand $246, Malaysia $248, Vietnam $268, and Singapore $401 billion. We’re not even anywhere near half of what Indonesia made, the closest neighbor we trail.
“The new government simply must give focused and determined attention to this abysmal export performance, as in it lies the key to solving the major perennial challenges our economy keeps facing, namely: (1) lack of quality jobs, (2) low incomes and high levels of poverty, and (3) higher prices, especially of food, leading to wide food insecurity and malnutrition among our poor—in short, the basics of “presyo, trabaho, and Kita.”
“There are those who ask, “But why focus on exports when we must worry about providing for our people’s needs first?” The question misses the point: by exporting more, we would be able to create more jobs and raise people's incomes so that Filipinos can have more. In the same way, a family would not limit itself to producing only for its own members’ needs; neither could it feasibly produce everything they need or want. It must sell goods and services outside of the household (that is, “export”) for its members to earn the income to gain access to the many other things they cannot economically produce.
“The high performing Asian economies (HPAEs) that pulled off the so-called “East Asian Miracle” in the 1980s and 1990s, documented by the World Bank in a book with the same title, had one thing in common: they pursued and attained very rapid export growth.
“High-performing” meant they achieved rapid growth in average incomes and immediate poverty reduction. Led by Japan, they included the four “tigers” of Hong Kong, South Korea, Singapore, and Taiwan, and by the early 1990s were joined by Indonesia, Malaysia, and Thailand. The book noted that creating an export push was vital in all these HPAEs.
“Now comes Vietnam, the newest export miracle story in Asia, having multiplied its export earnings 23 times over the past 21 years. The rest of its Asian peers only saw theirs expand two to four times in the same period (and ours grew the slowest). It has achieved the most rapid export growth seen in Asia. The critical elements of its export strategy are hardly unique: trade liberalization, vigorous foreign direct investment promotion, currency undervaluation, aggressive entry into free trade agreements with key trading partners, and vast markets like the United States.
“Meanwhile, our economy remains trapped in the vicious cycle of a limited internal market constraining the economy’s growth, leading to low average income and high poverty, bringing us back to the little internal market.
“An export breakout as exemplified by the HPAEs would be vital in getting out of this trap. That is why the Philippine Export Development Plan (PEDP) 2023-2027, now being spearheaded by the DTI, must receive far wider attention and commitment than all past PEDPs crafted since the enactment of the Export Development Act (Republic Act No. 7844) in 1994.
“People now like to say that we need an “all-of-government” effort on this-or-that initiative; for the PEDP, an “all-of-nation” push is what the country needs. That is because achieving export expansion entails far more than the DTI does. The PEDP should not be merely a DTI plan. We need a program that requires unison among all the moving parts, including exchange rate policy, infrastructure development, agricultural development strategy, human resource development, and fiscal and monetary policies.
“Vietnam, it seems, has conducted the complex symphony orchestra better than everyone else has. Can our sterling new economic team manage to do a Vietnam in a country where unity, solidarity, and teamwork have traditionally been in deficit?” [“Doing a Vietnam,” Cielito F. Habito, NO FREE LUNCH, Philippine Daily Inquirer, 31st May 2022]
Are we finally “problem-solving” instead of “spinning wheels”?
That is a long-winded way to say “thank you” to Ciel Habito.
Ciel will recall that seven years ago, at the 2015 Ateneo and UP Economic briefings, I stood up, and to the crowd, I must have sounded stupid – if not crazy.
I could not believe what I heard from the briefings. We were celebrating the resurgence of manufacturing. But what is the context?
In other words, we were not problem-solving but spinning wheels.
And Ciel explains it now better than I did.
Will we finally wake up?
Consider: “Social democracy, the best alternative,” Elfren S. Cruz, BREAKTHROUGH, The Philippine Star, 2nd Jun 2022. “Social democracy is a system of government that has values similar to socialism but under a capitalist framework. The ideology has people having a say in government actions and supports “a competitive economy with money while also helping people whose jobs don’t pay a lot.” That has proven successful in Nordic countries.”
Are we problem-solving or spinning wheels?
“Tourism should be a principal foreign exchange earner and a major job creator for us. Many of our islands look like paradise on earth, but our people also are among the most hospitable.” [“Tourism,” Boo Chanco, SUPPLY AND DEMAND, The Philippine Star, 3rd Jun 2022.]
Let’s get back to Ciel: “The high performing Asian economies” (HPAEs) that pulled off the so-called “East Asian Miracle” in the 1980s and 1990s, documented by the World Bank in a book with the same title, had one thing in common: they pursued and attained very rapid export growth.”
The blog often raised the point: “Beg for Western money and technology,” was how Lee and Mahathir explained the East Asian Miracle to Deng” – and if China is to lift its people from poverty.
Should we talk about social democracy or tourism or focus on problem-solving?
There are distinctions between a standalone system – or an industry – and an “ecosystem.”
As Ciel puts it, it is an “all-of-nation” push beyond an “all-of-government” effort.
And that is why the blog never tires of raising our instincts – aka our caste system: We are parochial and insular. We value hierarchy and paternalism and rely on political patronage and oligarchy; ours is a culture of impunity.
For example, the blog asserts that democracy is a mirror image of Christianity – and presupposes personal responsibility for the common good, as in love thy neighbor. It is not unfettered freedom. And which explains why America continues to stumble.
Let’s say it differently: Democracy is not about the “right” or “left” but the common good.
On the other hand, because of our instincts, we take it for granted that rank has its privileges – so long as we demonstrate paternalism for those lower in the hierarchy.
And in the process, we fall into the trap of “groupthink,” a “phenomenon that occurs when a group of well-intentioned people makes irrational or non-optimal decisions spurred by the urge to conform or the belief that dissent is impossible.” [Groupthink | Psychology Today]
Here’s a quote from an earlier posting, “With due respect to Senator Lina, what body of knowledge would support Du30’s war on drugs?
“More to the point, nations tried and failed to combat this menace, and the one singular success story – and has become the model and best practice – as far as the UN is concerned is that of Portugal.
“Conversely, the rest of the world saw us as the pariah. Still, our blindness was so profound that we rallied behind Duterte.”
Let’s talk about the Nordic countries – that embraced social democracy – vis-à-vis the East Asian Miracle.
“Industrialization gave rise to democracy and became fully established in the Nordic countries following the First World War. Although the Nordic Region remained neutral during the First World War, Denmark and Norway were forced into the Second World War when, in 1940, Germany attacked and occupied both countries. Sweden remained neutral throughout the war, while Finland initially sided with Germany. Finland suffered massive losses in the fight, first against the Soviet Union and subsequently against Germany. Norway was also severely affected by the war.
“Iceland, the Faroe Islands, and Greenland were under American and British control and had no actual contact with the rest of the region during the war. In just a few years, the American presence in Greenland led to the rapid development of the previously isolated community that had supported itself primarily through hunting and fishing.
“After the war, economic development took hold throughout the Nordic Region, helped by the US Marshall Plan. Finland’s foreign policy balanced a close relationship with the Soviet Union with closer ties with the West and thus the other Nordic countries. As dictated by Russia, the country maintained a strict policy of neutrality and traded with both the West and the Soviet Union. While Sweden maintained its neutrality, Denmark, Iceland, and Norway joined the Atlantic military pact NATO in 1949.” [The history of the Nordic Region | Nordic cooperation (norden.org)]
In other words, industrialization spawned democracy in the Nordic countries, not the other way around.
It is worth repeating, “The high performing Asian economies pulled off the so-called “East Asian Miracle” in the 1980s and 1990s, documented by the World Bank in a book with the same title, had one thing in common: they pursued and attained very rapid export growth.”
And how do they stand versus the Nordic countries? What metrics must we bring to bear?
Let’s start with poverty. While PHL is at 16.7%, Indonesia, Malaysia, Thailand, and Vietnam have less than a 10% poverty rate. And in Singapore, it does not even apply. On the other hand, the Nordic countries have over a 10% poverty rate.
Export-wise, Indonesia, Malaysia, Singapore, Thailand, and Vietnam outdo Finland and Norway. But Denmark did more than Indonesia; Sweden beat Indonesia and Malaysia.
And as far as mouths to feed are concerned, Indonesia, Malaysia, Thailand, and Vietnam have much more than all the Nordic countries – at less than 6 million – except Sweden with over 10 million. Malaysia, however, has over three times Sweden’s population.
And the preceding explain why the Nordic countries deliver more in GDP per capita. Yet, Singapore dwarfs all of them.
The bottom line: PHL must benchmark against our neighbors if we want to compare apples to apples.
Let’s shift to tourism and its impact on the Philippine economy.
“Before the pandemic, the Philippines Travel & Tourism sector’s contribution to GDP was 22.5% of the total economy (worth US$92.6 billion). However, due to damaging travel restrictions, it then plunged by 80.7% to a mere US$ 17.8 billion, dropping to just a 4.8% share of the country’s GDP.
“But in 2021, this rose to US$ 41 billion, representing a 10.4% share of the nation’s total economy, which signals the recovery of the sector is well underway.” [https://wttc.org/News-Article/WTTCs-latest-Economic-Impact-Report-reveals-significant-recovery-in-the-Philippines-Travel-and-Tourism-sector-in-2021]
In other words, we may have the fourth fastest Travel & Tourism GDP growth rate for any country in the world in 2021, yet we are still to recover our pre-pandemic scores. Sadly, those better numbers mean we lag our neighbors in GDP per person, including Vietnam.
The San Miguel project may be our best shot tourism-wise to date, but it will not appreciably raise PHL GDP per capita as exports did to Vietnam. “We averaged only $70 billion a year in merchandise exports, while Indonesia earned $182, Thailand $246, Malaysia $248, Vietnam $268, and Singapore $401 billion. We’re not even anywhere near half of what Indonesia made, the closest neighbor we trail.”
Beyond the sheer numbers, the multiplier effect — given the required skills, subindustries, and parts and components — of export products, especially techno-based, is far more significant than tourism and allied service industries.
Moreover, this is not the first time we hear that there is a silver bullet or a magic wand that will wipe our problem away.
For example, “There seems to be no indication that the party-list system in the Philippines can ward off traditional political elites in the national legislature and instill democratic principles. If anything, the party-list system seems to have accommodated traditional political and elitist structures. At the same time, having such strong attachments to elitist politics may hinder the capacity of the party-list system to provide a platform that can be an effective counterpoint to authoritarian tendencies.
“We can trace the inadequacies and conflicting features of the party-list system law to its key designer – Congress. They may have looked upon the party-list organizations as potential competitors or useful platforms in their quest to retain the power and privilege of their positions. Either way, the lasting effect of the party-list system can be regarded as one that undermines (rather than reinforces) the legacy of People Power.” [“The party-list system in the Philippines: Is it better or worse for democracy (?), Jorge Villamor Tigno, Asia Dialogue (theasiadialogue.com)]
In other words, think and pursue outcomes beyond system, procedure, or activity.
Outcomes define the successful pursuit of an effort. Take the American experiment: “the pursuit of life, liberty, and happiness.”
“What Biden is trying to push is much more about actually remaking our economy to do different things and regularly produces different outcomes.
“But its execution has lagged its vision. And the reason for this is uncomfortable for Democrats. You can’t transform the economy without first “transforming” the government.
“In April, Brian Deese, the director of Biden’s National Economic Council, gave an important speech on the need for “a modern American industrial strategy.” The question should move from “Why should we pursue an industrial strategy?” to “How do we pursue one successfully?”
“Do we have a government capable of “building”? The answer, too often, is no. We have a government that is extremely good at making building difficult.
“The first step is admitting you have a problem, and Deese did exactly that to his credit. “A modern American industrial strategy needs to demonstrate that America can build — fast, as we’ve done before, and fairly, as we’ve sometimes failed to do,” he said.
“He noted that the Empire State Building took just over a year to construct. We are more prosperous than we were then, and our technology far outpaces what was available in 1930. And yet does anyone seriously believe such a project would take a year today?
“One answer worth wrestling with was offered by Brink Lindsey, the director of the Open Society Project at the Niskanen Center, in a 2021 paper titled “State Capacity: What Is It, How We Lost It, and How to Get It Back.” His definition is admirably terse. “State capacity is the ability to design and execute policy effectively.”
“When a government can’t collect the taxes it’s owed or build the sign-up portal for its new health insurance plan or construct the high-speed rail it’s already spent billions of dollars on, that’s a failure of state capacity.
“What is needed most is a change in ideas: namely, a reversal of those intellectual trends of the past 50 years that have brought us to the current pass.
“A place to start is offered in another Niskanen paper by Nicholas Bagley, a law professor at the University of Michigan. In “The Procedure Fetish,” he argues that liberal governance has developed a puzzling preference for legitimating government action through processes rather than outcomes. We need to build more homes, trains, clean energy, research centers, and disease surveillance. And we need to do it faster and cheaper.
“He suggests, provocatively, that that’s because American politics in general and the Democratic Party, in particular, are dominated by lawyers. Biden and Kamala Harris hold law degrees, as did Barack Obama and John Kerry and Bill and Hillary Clinton before them. And this filters down through the party.
“Lawyers, not managers, have assumed primary responsibility for shaping administrative law in the United States,” Bagley writes. “And if all you’ve got is a lawyer, everything looks like a procedural problem.”
“So this is what I have become certain of Democrats spend too much time and energy imagining the policies that a capable government could execute and not nearly enough time imagining how to make a government capable of executing them. It is not only markets that have failed.” [“What America Needs Is a Liberalism That Builds,” Ezra Klein, The New York Times, 29th May 2022]
Are we finally “problem-solving” instead of “spinning wheels”?
This post is a long-winded way to say “thank you” to Ciel Habito.
Ciel will recall that seven years ago, at the 2015 Ateneo and UP Economic briefings, I stood up, and to the crowd, I must have sounded stupid – if not crazy.
I could not believe what I heard from the briefings. We were celebrating the resurgence of manufacturing. But what is the context?
In other words, we were not problem-solving but spinning wheels.
Gising bayan!
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