“FMIC, UA&P economists: above-7% growth doable,” Melissa Luz T. Lopez, BusinessWorld, 5th Jan 2018. “Improving global demand will add to continued strong investments and household consumption to fuel gross domestic product growth to hit the government's 7-8% target for 2018, according to economists of First Metro Investment Corp. and the University of Asia and the Pacific.
“Bigger and faster spending on infrastructure, the continued buildup of capital goods and strong private construction will boost economic activity, alongside the recovery of the manufacturing sector and an upbeat tourism sector …”
On the other hand, “By the looks of it, the Philippine economy has been getting more Manila- and Luzon-centric in the last 20 years. While I’ve noted that our economy’s growth is getting more inclusive …, it’s in the geographic dimension of inclusiveness where we don’t seem to be making progress. In fact, we seem to have moved in the wrong direction.
“The numbers say it all. Luzon accounted for 73 percent of our total gross domestic product (GDP) in 2016, even more dominant than its share 10 years prior (2006) when it was just 66 percent.
“Metro Manila alone (aka the National Capital Region or NCR) accounted for nearly 37 percent of GDP … Calabarzon is the next largest contributor to national output, being a far second with a share of 16.8 percent, followed by Central Luzon (9.5 percent) and Central Visayas (6.5 percent).
“The Cordillera Administrative Region (CAR) is third with P133,654 ... The case of CAR, while surprising at first blush, affirms that manufacturing, prominent in Baguio City, is the most potent driver of jobs and incomes in any regional economy. It is the common thread in all the regions with higher economic shares and average incomes.
“The lesson that emerges from all this is apparent: Manufacturing, which has been growing faster than the overall economy since 2010, deserves an even greater boost. And it’s not just about big factories.
“Much of it can and should take the form of greater value adding on farm products by more small enterprises all across the country. I’ve long argued that this would help raise farmgate prices received by our farmers with more competition to buy their products, rather than have a single large processor dictate monopsony prices that squeeze our farmers, as is still common in our countryside.
“If our economy is to be less Manila- and Luzon-centric, we ought to pursue even more strongly this goal of having more geographically inclusive small-scale manufacturing.” [“Development beyond Manila,” Cielito F. Habito, NO FREE LUNCH, Philippine Daily Inquirer, 5th Jan 2018]
In recent postings, the blog has argued that if we are to conquer poverty, we must drive sustainable wealth generation – and that comes from competitive products. And this is where our dilemma sets in, which is unsurprising given how Western higher education has influenced us. That is, it is logical yet linear and incremental.
For example, we’ve been addressing the factors of production to assist farmers become productive – and take it for granted they will farm the right produce. And in the case of rice, we assume it is a must being a staple – and more dramatically, rice is food security.
We take it as a good example of foresight but it isn’t. The evidence? We are still importing rice despite the bruhaha about food security. Because it is classic logical, linear and incremental thinking.
One technique in developing foresight is to ask the question, what is the end in view? Or where do we want to be? And the blog gave the coconut industry as an example. [See below re The Competitive Advantage of Nations]. To become world-class the industry must be producing the right portfolio of coconut-derived products where synergy amongst the products – both consumer and industrial – puts us head and shoulders above competition. It means taken together they will generate the greatest revenues versus friends from other countries.
The same exercise must be done with other agriculture products. Instead of simply doing crop rotation, we must be more circumspect and ask the question, what crops must we rotate – that will address man’s needs and raise his well-being? Will the portfolio give us a competitive advantage?
Once we know what to produce, we can walk back and retrace the food chain and figure out what each link demands – again, the end in view is to attain competitive advantage and generate the greatest revenues. Thus, we must tap the right technology, the right location of the farms and the right scale. And as we keep retracing the food chain we can figure out the dots that we must connect.
That is an example of how innovation and product development is pursued in the private sector. Those who read about Steve Jobs will recall how he conceived the iPod following the Mac. He recognized that music is the way to the soul and he wanted to move beyond the Sony Walkman.
And so, he asked the question, why a hundred songs, not a thousand songs? And that meant moving to digital technology. And to connect the dots, he sent his team to Japan to look at their transistor technology and they found a hard drive the size of a dollar coin. And the rest as they say is history.
On the other hand, how we designed the support system behind land reform is, again, logical yet linear and incremental. It missed the object of the exercise: to make the farmers and their produce globally competitive. It will take some doing … and time …
That is why the title of this posting is about 2018 and beyond.
Granted that beyond a consumption economy (aka OFW economy) we now recognize that manufacturing is key, are we in fact forward-looking and forward-thinking measured against global yardsticks?
The blog has argued that we are limiting our perspective because of our instincts of parochialism and insularity. And it also explains why our local economy is larger compared to Thailand (3/4 of PH), Malaysia (1/2) and Vietnam (1/10). But let’s hold that premature celebration …
Sadly, despite the war on poverty to boot, we’re tops in poverty rate: Vietnam, the worst performer of the 3, has only half of ours; Thailand at a third; and Malaysia at less than 1/5.
Again, our failure to produce competitive products limits our ability to compete beyond our shores. Recall the new UN sustainable development goals (SDG): rapid infrastructure development, industrialization and innovation and competitiveness. To add insult to injury, our structural flaws and deficiencies negatively impact our ability to attract FDIs.
And the correlation is so stark … and explains why we’re the regional laggard: If we set our FDIs/Exports at index 100/100, the comparison looks very scary: Malaysia = 189/381; Thailand = 301/493; Vietnam = 180/407. Very scary? Because regional/multilateral trade agreements (e.g., c/o APEC) will sink us deeper absent export-competitive PH products. Go figure.
Nine years ago, when the blog was born, it pointed out a very similar picture. Have we asked ourselves why we’re so out of whack? An organism that is unable to adapt that it risks extinction?
Our underdevelopment is beyond the function of imperial Manila. Think of it as the “effect” and our culture as the “cause.” But it’s a great soundbite indeed (no different from food security) yet it doesn’t bring us closer to understanding ourselves.
It’s then pleasing to read the article, “If federalism is the answer, what is the question?” It’s: (a) a great way to employ foresight, and (b) a good “cause-and-effect” exercise.
And economists concede that culture matters: We are parochial and insular; defer to hierarchy and expect paternalism in return; and value and rely on political patronage and dynasties and oligarchy. And that is the “why” of imperial Manila, if we still don’t appreciate it.
Simply, we wear a blinder and can’t see beyond hierarchy … and beyond our shores. Yet there is no denying that GDP will grow in the 7% range. Still, that means we need at least one generation to get over the hump – given how far behind structural flaws and deficiencies have brought us.
Short-term thinking plus logical, linear and incremental thinking would explain why we sound like a broken record. We’ve yet to gear up and educate Juan de la Cruz in big data and analytics. It is fundamental to innovation and competitiveness. And a good starting point is to understand the imperative of benchmarking, which demands maturity: we must accept and learn from the foresight and genius demonstrated by the Asian Tigers.
The writer heard it first 50 years ago – that the ensuing year’s economy would be better than the previous – when he started his career. If we can’t change our ways, Rizal is truly prescient …. And we don’t want the elite class to be the present-day Padre Damaso ...
“Why independence if the slaves of today will be the tyrants of tomorrow? And that they will be such is not to be doubted, for he who submits to tyranny loves it.” [We are ruled by Rizal’s ‘tyrants of tomorrow,’ Editorial, The Manila Times, 29th Dec 2015]
“Now I know why Paul dared to speak of ‘the curse of the law’ (Galatians 3:13). Law reigns and discernment is unnecessary, which means there is little growth or change in such people. When you do not grow, you remain an infant.” [Faith and Science, Open to Change, Richard Rohr’s Daily Meditation, 23rd Oct 2017]
“As a major component for the education and reorientation of our people, mainstream media – their reporters, writers, photographers, columnists and editors – have an obligation to this country . . .” [Era of documented irrelevance: Mainstream media, critics and protesters, Homobono A. Adaza, The Manila Times, 25th Nov 2015]
“National prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value, as classical economics insists . . . A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade.” [The Competitive Advantage of Nations, Michael E. Porter, Harvard Business Review, March–April 1990]
“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.” [William Pollard, 1911-1989, physicist-priest, Manhattan Project]
“Development [is informed by a people’s] worldview, cognitive capacity, values, moral development, self-identity, spirituality, and leadership . . .” [Frederic Laloux, Reinventing organizations, Nelson Parker, 2014]
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