Let’s count our economic blessings

Published December 23, 2018, 12:00 AM

by manilabulletin_admin

Bernardo M. Villegas
Bernardo M. Villegas

Thanks to the focus on the building of the Philippine nautical highway during the presidency of Gloria Macapagal Arroyo, subsequent administrations have had a keener appreciation of the crucial importance of investing a much higher percentage of our GDP on infrastructure than the historical 1.5% that prevailed in the past. The “Build, Build, Build” program of the Duterte administration has actually set a pace that is expected to be kept by at least the next two to three administrations since it is quite obvious that we are much behind our East Asian peers in infrastructure development. We should also count as a clear blessing the fact that we are in the middle of the most dynamic economic region in the world today, the Asia Pacific region, which is attracting investments and technology into the infrastructure sector from world-class builders of airports, tollways, railways, bridges, and other infrastructures from such countries as Japan, South Korea, Taiwan, Spain, China, and many others.

Finally, as the greatest of our blessings we have a young, growing and English-speaking population in the midst of a world, both in the West and East, where developed and even developing countries like China and Thailand, are already suffering from demographic suicide, from aging populations that are dragging their respective economies to slower growth rates. Thanks to this demographic dividend, we can count for a long time to come on having millions of our population as overseas workers, sending very precious remittances that constitute some 12 percent of GDP, contributing to a strong domestic market for both industries and services. This population bonanza also enables the country to be a leading source of BPO-IT services for the rest of the world. It will take a long time before Artificial Intelligence (AI) and robotization can make a significant dent on this important sector of the economy that has tremendous multiplier effects on employment and on the real estate and consumptions sectors.

Our blessings are our assets in the balance sheet of our nation’s economy. It is only proper as we move to a new year that we talk about our liabilities which are preventing the economy from growing at its potential of 8 to 10 percent yearly, growth rates which were easily attained by China and India for more than a decade when they were at similar stages of development in which we are and are now being attained by Vietnam, Myanmar, Cambodia, and Laos, economies which still have lower per capita incomes than the Philippines. What are these liabilities that we have to overcome in the next decade or so? First, is the very low productivity of our agricultural sector. The reasons for this have been given time and again by experts like Dr. Rolando Dy, Director of the Center for Food and Agribusiness of the University of Asia and the Pacific. We have neglected, in contrast with the experiences of Thailand, Malaysia, and Vietnam, the provision of farm-to-market roads, irrigation systems, post-harvest facilities and other essential services to our small farmers. We implemented a very imperfect agrarian reform program that left our small farmers even poorer because of the lack of these facilities. We have also mismanaged our rice sector, insisting on self-sufficiency that was an impossible dream because of our lack of water resources in comparison with the rice-exporting countries of Thailand and Vietnam.

Also a major liability is the continuation of a “Filipino First” policy in our industries that have been overly protected from foreign competition. Enshrined in our Constitution are too many restrictions against foreign investments in public utilities and other strategic industries that have prevented the flow of Foreign Direct Investments (FDIs) that could have generated more employment and helped modernize many of our industrial and agricultural sectors. It is only hoped that the next Congress that will be inaugurated in July 2019 will finally work on amending the Philippine Constitution to remove these restrictions that do not exist even in a communist country like Vietnam (that attracts FDIs twice our level). If we are able to effectively implement the “Build, Build, Build” program, improve the productivity or our agricultural sector, and attract more FDIs, we will surely witness our GDP growing at 8% to 10% in the next ten or more years instead of the mediocre 6% to 7% that we are experiencing now. Only by growing at a much higher rate are we going to be able to generate enough resources so that we can reduce our poverty incidence to single-digit rates in the next decade or so.

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