Focusing on the economy

These articles ought to get the government – the current and the next – focusing on the economy like a laser? (a) Amending the economic provisions of the Constitution, Business Mirror Editorial, 5th May 2015; (b) Limited FDI inflows show that the Philippines is uncompetitive, Benjamin E. Diokno, Core, Business World, 5th May 2015; (c) Aquino gets last-ditch reform push, Melissa Luz T. Lopez, Business World, 5th May 2015.

But to focus there must first be clarity in thinking, and thus in government policy formulation and priority setting? And that calls for leadership and unlearning “crab mentality”? This blog has often raised Clinton’s “It’s the economy, stupid” mantra. Consider: “The proposal to lift the moratorium on granting of new exploration permits, however, got the cold shoulder from the Mines and Geosciences Bureau (MGB).”[Lopez, op. cit.]

“The rationale of the Executive branch: why would it allow new mining projects if it would incur more losses for government with a lesser share in revenues? Then it’s better to not issue permits until the share of government is more equitable,” MGB Director Leo L. Jasareno said by phone. It is sticking to that position for now,” he added, clarifying that the Environment department issued an order that took effect on April 2, allowing area expansion for existing mining exploration projects. The moratorium on new mining projects was imposed in 2011 and extended in 2012 through Executive Order No. 79.”

The point goes beyond the new mining projects. It is about clarity, or the lack of it. Is government talking apples and oranges? For example, while the reform under Arangkada recognizes the imperative of higher government revenues, its overarching goal can be spelled out as follows: (a) to double GDP growth in 3 years; (b) while generating US$7.5 billion in annual FDI or $75 billion over 10 years; (c) US$ 100 billion in exports; and (d) 10 million jobs – which at the end of the day will yield over one trillion pesos in revenue for the Philippine economy within this decade. [http://www.investphilippines.info/arangkada/executive-summary/]

“Over one trillion pesos in revenue.” Of course we can’t have confidence in that perspective since we don’t have the ecosystem of a competitive economy. But we have to start somewhere. How has the government translated Arangkada to reflect clarity in thinking, policy formulation and priority setting? A fundamental challenge faced by the Philippine economy – if it is to create the ecosystem inherent in economic development and nation building – is the need for a balanced portfolio comprised of: (a) industry, (b) agribusiness and (c) services. Sadly, ecosystem and portfolio management don’t figure in our economic model. They are imperatives we can learn from the private sector.

It’s no secret that the economy is skewed to services through the sacrifices of 10 million OFWs . . . while we contend with an oligarchic economy that has proved reform-proof. Because we the people – or just the elite – celebrate it?

Says Arangkada: “Remittances of Filipinos abroad increased 187% in 9 years to approach US$ 20 billion [which has already been surpassed] and will soon be the country’s largest source of foreign capital. They stimulate an increasing share of GDP growth and shield the elite from pressure to reform.” Where are we or who are we, really?

“In an increasingly interlinked and competitive world, accelerating growth is an imperative, not a choice. The Joint Foreign Chambers of Commerce in the Philippines (JFC) estimates that, to achieve these results, the country must focus on more rapid development of the Seven Big Winner Sectors and move twice as fast! 

“Arangkada Philippines 2010: A Business Perspective is about creating a bright future for the Philippines . . . Adopt a plan to double GDP growth in 3 years and target US$ 7.5 billion in annual FDI and US$ 100 billion in exports . . . The Philippines has lagged for too long, losing competitiveness, despite its immense potential and location in the fastest growing region.

“Philippine growth has not been inclusive. In 2006 there were 24 million poor Filipinos, about the same percentage of population as in 1986. By contrast, the other ASEAN-6 eliminated poverty or reduced it by half. In the fast-growing Asian region, the Philippine economy is becoming relatively smaller, in share of total GDP and in PCI, among the ASEAN-6.

“Although located in the world’s fastest growing region, the Philippine economy has long grown slowly. China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Singapore, Taiwan, and Thailand have grown an average of 7% for over 25 years. India and Vietnam may eventually join this group. The Philippines must have an 11.6% growth rate to reach a PCI of US$12,000 by 2030, assuming a 2% population growth rate declining to 1.5%.

“Investment is needed for higher growth, yet the investment rate has fallen from 25% in 1997 to 15% in 2009. FDI is weak, and government has inadequate revenue for capital spending. Doubling spending on physical infrastructure (to 5-6% of GDP) and social infrastructure (to 8-9% of GDP) would greatly improve the investment climate and support higher, sustainable rates of growth.

“Philippine FDI inflows are the weakest of the ASEAN-6. Political instability deterred foreign investment in 1970-89, when net FDI averaged US$ 200 million. Net FDI rose to a US$ 1.4 billion average in 1990-2009, reaching US$ 3 billion in 2006 and 2007. From 1970-2009 the country received US$ 32 billion in FDI, but Indonesia, Malaysia, and Thailand each received 2-3 times as much.

“Philippine commodity exports reached a record high of US$ 50.5 billion in 2007, contributing 35% of GDP but face many challenges. The top exports are electronics (60%) and other manufactured goods (25%). Agro-based products (6%) and mineral products (4%) are underdeveloped. IT-BPO service exports – valued at US$ 8 billion in 2010 – could more than double to US$ 20 billion by 2015.”

Do we need more roadmaps when these challenges have been played time and again by most everyone who care about the Philippines? But where is government? Where are we or who are we, really?

“These issues have been on the agenda of business organizations for a long time, including in Arangkada . . . Sought for comment, Presidential Communications Secretary Herminio B. Coloma, Jr. said Malacañang remains receptive to suggestions. ‘We are always open to proposals from the business sector and other stakeholders,’ Mr. Coloma said via text. ‘Concerned government agencies are expected to give due attention and consideration, and give feedback to these stakeholders.’” [Lopez, op. cit.]

With due respect, words and more words? Who will do what, when, where and how?

“The Aquino administration, in its final year, and the next administration, has to move heaven and earth to drastically reform the Philippine economic landscape.” [Diokno, op. cit.] “The moral of the story is clear: success in a competitive world requires hard work. We cannot leave it to chance. Yes, the Philippines is growing, but so are our competitors. And our competitors are many years, even decades, ahead of us. Yet, they don’t rely on national elections to boost their economies.”

In other words, while we are faced with the demands inherent in freedom and democracy – and thus the rule of law – they go beyond the exercise of the right to vote. Elections are not a panacea. What we've witnessed over decades is that freedom and democracy Philippine-style has struggled being the mirror image of who we are as a people. And as ought to be, the future is in our hands.

The pursuit of development indeed is a challenge yet it is not about reinventing the wheel. Consider: man by nature learned and developed to become a community, local and then regional if not global, because of his inherent needs starting with the barter trade. But why have we stubbornly remained parochial? Meanwhile que sera sera has confined us to the caboose and, chances are, will remain there given the demands of progress in the here and now, the 21st century, are running at warp speed.

Not surprisingly, we read: “We thought the good Speaker has forgotten all about such amendments (to the economic provisions of the Constitution) given Malacañang’s expression of lack of interest in them. But the Speaker is obviously unimpressed by the Palace’s stance. And for good reason. If we do not remove these restrictive provisions, we might, as well, dissipate any notion of development for our country’s economy.” [Business Mirror Editorial, op. cit.] Translation: “The Philippines must have an 11.6% growth rate . . .” [see above] – not the 7% that makes us gaga!