News item: “Lawmakers to refile Bulacan airport ecozone bill after Marcos veto.”
It’s heartening that two pillars of our chattering classes are flexing their muscles. But before we go any further, we better not drop the ball as we did with Arangkada.
“Amid the gravest food, energy, education, and geopolitical crises ever to pummel the Philippines, can the country be prosperous on a path of more robust growth?
“Yes, says Ramon S. Ang (RSA), the president and CEO of San Miguel Corp., the country’s largest diversified industrial conglomerate. With P316 billion in sales in the first quarter, SMC is on track to chalk up a record P1.2 trillion in revenues in 2022.
“How can the Philippines grow higher and faster? Thru rapid industrialization and expanded export earnings, says Ang. He thinks the country can easily generate $200 billion in exports annually, from the disappointing $60 billion to $76 billion in recent years.” [“A $200B export plan,” Tony Lopez, Virtual Reality, manilastandard.net, 8th Jul 2022]
“We can be more competitive in the Southeast Asian region and ASEAN in terms of attracting locators specializing in various industries, aviation, technology, science, medicine, manufacturing, and many others.
“This will bring much-needed jobs, livelihood – and valuable experience – to our people. Even local industries throughout Luzon will benefit from increased employment and livelihood opportunities, tourism, economic activity, and the improvements in infrastructure that will come with the development.
“In a briefing, RSA explained that the expected export revenues would come from four areas: (1) the new airport, (2) the ecozone focused on semiconductor manufacturing and industrial goods like batteries for EVs and renewable energy power plants; (3) a university city in tie-up with leading universities in the US, Europe, and China; (4) a world-class medical center with research facilities in a partnership with a university with the caliber of Stanford.
“Taiwan Semiconductor Manufacturing Co. or TSMC is the world’s largest contract manufacturer of the semiconductor chips – otherwise known as integrated circuits – that power our phones, laptops, cars, watches, refrigerators, and more. Its clients include Apple, Intel, Qualcomm, AMD, and Nvidia.
“TSMC is said to be scouting for new locations to spread their manufacturing facilities. That will protect their clients from any supply shortage if China invades Taiwan, similar to Russia's invasion of Ukraine.
“RSA said he intends to create a science and technology export hub with the cheapest “logistics” cost because it is next to the airport and less than half an hour to the Manila seaport via an expressway he is also building.
“I got the impression he was already in conversation with potential locators, including TSMC and others, which will manufacture battery power storage systems, electric vehicle makers, and modular nuclear power assemblies. He thinks the zone can export $200 billion annually.” [“Airport economic zone,” Boo Chanco, DEMAND AND SUPPLY, The Philippine Star, 8th Jul 2022]
Those familiar with the blog may recall that it has raised the challenge for industry leaders Messrs. Ang and Dominguez to lead the effort of replicating the success of Vietnam in attracting Samsung and Apple. And the object is to accelerate the Philippines’ industrialization and set export targets of $200 billion to approximate the GDP levels of our neighbors.
And why the blog quoted Ciel Habito’s article a couple of times: “How we wish our next secretary of the Department of Trade and Industry (DTI) would be known as the champion and booster of Philippine exports,” someone mused in a conversation. He came from knowing how far behind we have been left by our comparable Asean peers in export performance.
“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 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.” [“Doing a Vietnam,” Cielito F. Habito, NO FREE LUNCH, Philippine Daily Inquirer, 31st May 2022]
But let’s get back to Boo: “Ramon Ang of San Miguel is an enigma to policy wonks and business rivals. He doesn’t make business decisions the way they do. He takes risks others won’t dream of taking. It’s partly jealousy too. They can’t accept that the upstart Tondo boy, who has not taken an economics course and with no MBA from some fancy foreign business school, is doing better than they are.” [“Airport economic zone,” Boo Chanco, DEMAND AND SUPPLY, The Philippine Star, 8th Jul 2022]
At the risk of sounding like a broken record, let’s hear from a preeminent Filipino economist, Bernardo M. Villegas: “I would heed the advice of George Santayana, another famous professor who taught at Harvard. Santayana gave the world the following advice: “Those who cannot remember the past are (condemned) to repeat it.” [BusinessWorld, 28th Jun 2022]
“During these last 30 years, the world experienced three severe global crises: (1) the East Asian Financial Crisis of 1997 to 2000, (2) the Great Recession of 2008 to 2012, and (3) the more recent global economic crisis precipitated by the COVID-19 pandemic and further aggravated by the Russian invasion of Ukraine, the Philippine economy was among the most resilient in the world.
“Given the incoming Administration of President Ferdinand R. Marcos, Jr.’s choices for his economic team of very competent and experienced technocrats, one can expect a continuation of the yearly GDP growth rate of at least 6% to 7%. If the next administration can significantly improve governance and minimize corruption, there is an upside: the growth rate can accelerate from 8% to 10%.
“Those who cannot remember the past are (condemned) to repeat it.
“Who can disagree with that? For example, which of the following can’t we remember?
- The comprehensive agrarian reform program failed to “connect the dots,” i.e., is Philippine agriculture a dismal failure?
- The party-list system did not even the playing field, i.e., local lords continued to rule local governments.
- The OFW phenomenon created over 10 million “high-paying” jobs; it is today a pillar of the Philippine economy. Yet, poverty and joblessness remain.
- The call centers – nor the OFW phenomenon – did not eliminate the challenge of industrializing.
- The Philippine Competition Commission did not undo our oligarchic economy.
- The Duterte war on drugs did not eradicate the drug menace.
- The tax rationalization measures – from GMA to Du30 – did not raise our FDIs to match our neighbors.
- To add insult to injury, we are not acknowledging the toils that Juan de la Cruz expended to bring to the country over $50 billion in remittances; instead, we want to claim credit because of our “outstanding economic managers.”
In other words, the Ang initiative faces other detractors beyond the Marcos veto, given our long history of economic mismanagement.
And why we have been the regional laggard for the longest time.
What to do?
Recall the 3Cs of the hardy mindset. Messrs. Ang and supporters can revisit the discussions from the blog: (1) Commitment, as in the sense of purpose and meaning, (2) Challenge, that “change” rather than “stability” is the norm; and (3) Control, i.e., we can’t problem-solve because our caste system taught us that we could control others when we only have control over ourselves. And that reinforces the reality imposed by this universe, i.e., change and not stability.
It is not easy to get Juan de la Cruz to embrace and commit to a sense of purpose and meaning especially given our instincts of “stability,” as in our caste system. And why we value hierarchy and paternalism. And since Messrs. Ang and supporters don’t have control over Juan de la Cruz, they have to figure out how to get him on board.
And recall the GPS model often discussed by the blog: Where are we; Where do we want to be; How do we get there.
In defining where we want to be, a great model is to identify a benchmark that we want to replicate. And the Pearl River Delta Economic Zone is such a benchmark.
“In 1979, the Central Government of the People’s Republic of China announced that Guangdong Province would be allowed to follow less restrictive economic policies; and would be permitted to set up three Special Economic Zones (SEZs), including two in the Pearl River Delta.
“Preferential policies in the SEZs included features designed to attract foreign investment, such as a 15 percent tax rate, tax holidays of up to five years, and the ability to repatriate corporate profits and capital investments after a contracted period.
“They also included duty-free treatment of imports of raw materials and intermediate goods destined for exported products, as well as exemption from export taxes.
“Guangdong’s early experience with reform allowed a market-oriented culture to develop earlier than in other places in the Chinese Mainland. From 1979, Guangdong Province and the SEZs received more significant political and economic autonomy than other jurisdictions in the Chinese Mainland. Areas of greater “autonomy” included finance and fiscal matters, foreign trade and investment, commerce and distribution, allocation of materials and resources, labor, and prices.
“In 1988, Guangdong was granted expanded powers to set its economic direction and was designated a “comprehensive economic reform area.” That gave rise to (a) the creation of the Shenzhen Stock Exchange and (b) the development of a land lease system and some housing privatization. Shenzhen became a leader in foreign exchange markets, operation of foreign banks, land reforms, and stock market development.
“The economic development of the Pearl River Delta Economic Zone took off explosively. The region’s GDP grew from just over US$8 billion in 1980 to more than US$89 billion in 2000 and US$221.2 billion in 2005. During that period, the average real GDP growth rate in the Pearl River Delta Economic Zone exceeded 16 percent, well above the People’s Republic of China’s national figure of 9.8 percent.
“Since the onset of China’s reform program, the Pearl River Delta Economic Zone has been the fastest-growing portion of the fastest-growing province in the fastest-growing large economy in the world. In the process, a region that was once largely agricultural has emerged as a manufacturing platform of global importance. It is a world leader in producing electronic goods, electrical and electronic components, watches and clocks, toys, garments and textiles, plastic products, and various other goods.” [Wikipedia]
In other words, we don’t have to reinvent the wheel. That is not rocket science yet remains a hard nut to crack because of our parochialism and insularity.
Benchmark. Benchmark. Benchmark.
It is the guardrail to meet the demands of the 21st century – innovation and global competitiveness. We cannot measure our efforts with our instincts or the same thinking that created our problems in the first place – and turned us into the laughingstock stock of the region, if not the world.
See above; those that cannot remember the past are (condemned) to repeat it.
It’s heartening that two pillars of our chattering classes are flexing their muscles. But before we go any further, we better not drop the ball as we did with Arangkada.
Gising bayan!
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