Taking a long term view

Published August 31, 2020, 10:00 PM

by Dr. Bernardo M. Villegas

Part 2

Another strong fundamental of the Philippine economy that no virus, no matter how virulent,  can take away from the Philippines is what we can call a geographical dividend.  Our Archipelago is right at the epicenter of the most dynamic economic regions,  Asia Pacific, during the early decades of the twenty first century. The last century, called the American century, was characterized by a three-cornered competition among the US, Japan and the EU for global economic dominance.  The twenty first century, called the Asian Century, is  characterized by a co-opetition (cooperation and competition) among three enormous territories, i.e., China, India, and the ASEAN Economic Community to which we belong.  As many parts of the global economy are adopting inward-looking, ultranationalistic economic policies leading to a slowdown in global trade, the ASEAN Economic Community is still strongly committed to free movement of goods, services, investment and capital from which Philippine investors and entrepreneurs are benefitting.  Through the balancing strategy adopted by the Duterte Administration, the Philippine economy is also exerting much effort to engage the Northeast Asian economies like China, Taiwan, Hong Kong,  South Korea and Japan in trade and investment agreements.

Another strong foundation for long-term growth after we recover from the pandemic in the next two to three years is the abundance of natural resources, especially in the tourism industry.  There are enough very attractive destinations among our more than 7,000 islands that can help us to compete with such famous sites as Bali in Indonesia.  Very recently, the international journal, Travel and Leisure Magazine, rated Palawan as the best island destination in the world for international tourism.  Palawan has some 2,000 islands.  In fact, it will be the only group of islands that will have three international airports, i.e. Puerto Princesa, Coron and San Vicente. There are other regions in the Philippines that have similar attractions (Western and Eastern Visayas, Bicol, Northern Luzon, Southern Luzon, MIMAROPA, etc.) that render the long-term future of both domestic and international tourism very bright after we survive the present crisis.  Although international tourism may take at least the next two years to bounce back, the immediate prospects for tourism have to do with some 60 million Filipinos who, before the pandemic, were getting to know their own country.  It is important that the Government (both at the national and local levels) will be able to recover from their paranoia about COVID-19 so that we can allow freer movement from one province to another, from one island to another.  The Build, Build, Build program especially in the countryside will contribute to a quick recovery of domestic tourism as we continuously improve the Philippine Nautical Highway that has done much to stimulate domestic travel.  Filipino families will find it hard to resume their traveling to international destinations for the next year or so, especially because some of the favorite destinations in Europe and Asia Pacific seem to be suffering from second or third waves of the virus as happened in Spain during the last week of July 2020.   That is why we have to unleash the potentials of domestic tourism as soon as possible.

Our young, growing and English speaking population will also enable us to revive very quickly our export of manpower in the form of the Overseas Filipino Workers (OFWs) that have been the source of over $30 billion annually just before the pandemic.  As the developed countries slowly recover from the Great Depression, they will continue to suffer from the problem of ageing brought about by their demographic crisis (Japan is a leading example).  These developed countries (most of them are in Europe and Northeast Asia) will continue to have strong demands for health workers (especially nurses), care givers, teachers, IT professionals and even construction workers .  As long as we are investing heavily in the constant retraining and the upscaling of our workers (including  making them fluent in such languages as Japanese, Mandarin, German, Italian, etc) we can reverse the flow of returning OFWs (an estimated 500,000 of them have returned during the pandemic) as long as we focus on sending younger and higher-skilled workers who can replace the domestic and other low-skilled service workers.  I know of a good number of Filipino manpower search companies partnering with Japanese, German, Norwegian, Dutch and other multinational enterprises in preparing Filipino workers for hiring in their respective countries once the global recovery gathers more steam.  We should encourage our educational system, especially the Tech-Voc sector, to  invest more in technical skills rather than in academic tertiary  education. Here I envision TESDA being more aggressive in replicating the models of such successful tech-voch schools as the Dualtech Training Centre, the Meralco Foundation Institute (MFI), the Centre for Technology and Enterprise (CITE) in Cebu, and company-sponsored technical schools in the construction, hospitality, and seafaring sectors.

Thanks to the large inflows of dollars from the OFWs in the last twenty years (recently more than $30 billion annually before the pandemic), we have accumulated record amounts of international reserves that resulted in our strong currency (which has been the only one appreciating among our ASEAN peers).  These abundant reserves have prevented the usual capital flight that haunted our economy in the 1980s and 1990s.   Because we have been able to stop capital flight, we have been able to increase our domestic liquidity leading to low interest rates, which in turn have enabled strong consumption and investing activities.  These low interest rates have also enabled us to fund from domestic sources a great portion of our Build , Build, Build program which included a s strong participation of the local construction industry and the real estate sector.  Although the high-end part of the real estate sector may have limited space to grow in the intermediate future, there is still a huge back log in the low-cost, economic and mid-market housing sectors that will lead the recovery in the real sector in the next five years.  The good news about the real estate and construction  sectors is that there are regions in the Philippines that have been growing faster than the National Capital Region over the last five to seven years, such as Central Luzon and Bicol; and provinces like Cavite, Laguna, Batangas, Iloilo and Davao.  With the Balik Probinsiya program of the government, these high-growth regions will attract housing and other real estate investments that will be part of the strong economic recovery three to five years from now. (To be continued).


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