Business NEWS

China has become increasingly dependent on the rest of the world for the huge quantities of raw materials that are required for continuous, albeit slower, growth.  It is already the world’s largest buyer of copper, the second biggest buyer of iron ore, and the third largest buyer of alumina.  It absorbs around a third of the global supply of coal, steel and cotton, and half of its cement. It is the second largest energy consumer after the U.S. with nearly 70 percent produced from burning coal.  In 2005, China used more coal than the U.S., India and Russia combined.  In 2004, it accounted for nearly 40 percent of the increase in the world demand for oil.  Although its growth has been slowing down to 5 per cent or less in  recent years and may never reach the income per head now enjoyed by the US and other OECD countries, the more than 700 million Chinese who have already attained middle-income levels will be making huge claims on the world’s supply of grain harvest such as soybean, wheat and maize.  As the other 700 million are able to go beyond just subsistence level of existence, food security will be the greatest challenge to this country that even today already has the largest GDP if measured, not at nominal figures but at Purchasing Power Parity (PPP) terms.  As of 2020, China’s GDP in PPP terms, according to IMF, was at $24.162 trillion compared to $20.807 trillion for the U.S.   To satisfy such a huge demand of the domestic market, China will need to import huge amounts of raw materials from other countries.

Philippine political relationships with China are fraught with difficult challenges.  A most recent provocation was the presence of 220 Chinese vessels that were spotted moored at Whitsun Reef last March 7, 2021.  The reef is within the Philippines exclusive economic zone over which our country enjoys the exclusive right to exploit or conserve any resources.  An official diplomatic protest has already been lodged by our government.   This incident is just another reminder of the tense territorial standoff in which China, the Philippines and four other governments have been locked over resources, sea lanes  and busy waterways for decades.  Former Supreme Court Justice Antonio Carpio described very succinctly the source of this tension in a column in The Inquirer.  He referred to China’s three warfares strategy which China adopted in 2003.  The strategy was meant by the  Chinese to seize the South China Sea without triggering a war. 

Article III on the Bill of Rights also contains more principles containing values to be protected.  Section 3 protects private data by declaring communication and correspondence to be inviolable except upon lawful order of the court or when public safety or order require otherwise as prescribed by law.  In Section  4, the freedom of speech is guaranteed by declaring that no law shall be passed abiding the freedom of speech, of expression, or of the press, or the right of the people peaceably to assemble and petition the government for redress of grievances.  Also highlighted is the freedom of religion:  “The free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall forever be allowed.  Section 7 recognizes the right of the people to information on matters of public concern.  Section 8 defends the freedom of association for purposes not contrary to law.  Especially relevant to economic progress is the protection of private property as declared by Section 9 affirming that “private property shall not be taken for public use without just compensation.”

Almost all sectors of society are veering towards contactless transactions:  Banks, malls, restaurants, sports, utilities, public services, telemedicine, and public entertainment.  Even after the pandemic is put under reasonable control, it is expected that many features of the contactless culture will remain.  In my own field of education, blended learning is here to stay.  Even when face to face classroom instruction will be allowed, both teachers and students will still want to continue to have recourse to online methods of instruction.  The saving in transport time and the comfort of staying at home while attending or giving classes will convince most school communities to still depend on online learning for part of the delivery of the curriculum.

Those in the hospitality sector who can take a long-term view (five to ten years) have reason to be optimistic, despite the carnage that some five-star hotels have suffered.  Once the pandemic is put under reasonable control three years from now, the Philippines will be one of the first countries in Asia to enjoy a boom in international tourism.  Recently, an international magazine on travel and tourism ranked Palawan as the best island resort in the world, outshining such more famous islands as Bali and Hawaii.  If one considers that the Palawan cluster has more than 2,000 islands and that there  are hundreds of other islands all over the Philippines that can compare with the attractions of Coron, El Nido, San Vicente and others resorts in Palawan, it is not being overly optimistic to project a very bright future for Philippine tourism over the next decade or so.  As long as the Government and the private sector persevere in implementing the Build, Build, Build program over the next decade or so, especially in the construction and renovation of airports all over the Archipelago, we can expect to be a destination of choice among the hundreds of millions of Chinese, South Koreans, Japanese, and Taiwanese who will  be leading international tourism in East Asia. We can aspire to be what Spain has been to the Northern Europeans as a preferred tourism destination because of its sun and sand.  When I resided in Spain for a number of years at the beginning of this millennium, I was extremely impressed with the figures on international tourism.  In any given year, there were more international tourists than the entire population of Spain.

One of the blessings of the pandemic is the greater amount of time that family members can spend in moments of prayer.  The family Rosary has been more frequently prayed with more members participating.   Some who used to go to Mass only Sundays have developed the habit of attending some online weekday Masses.  Although some actually have spent more working hours at home than they did  in the office before the pandemic because of the significant saving in time that used to be devoted to long hours of commute, there has been more time for quiet reflection at home.  During this second Lenten Season we are spending during the pandemic, It may be time for those who want to take their Catholic faith more seriously to heed the advice of St. John Paul II when he wrote “If in our times Christians must be distinguished above all by the art of prayer, how can we not feel a renewed need  to spend time in spiritual converse, in silent adoration, in heartfelt love before Christ present in the Most Holy Sacrament?  How often, dear brothers and sisters have I experienced this, and drawn from it strength, consolation and support.”

CHANGING WORLD

Another crisis that has been turned into an opportunity during these difficult times of the pandemic concerns the way the labor force is more aware of the need for educational and training programs that can more quickly equip them with employable skills.  More than two million students have failed to enrol in formal educational courses during the academic year because of loss of income.  There is a proliferation, though, of short courses, training programs (including those sponsored by business enterprises for their own employees), webinars and other ways to upskill, reskill  and retool workers for the rapidly changing work environment in the New Reality.  To my mind, these developments can partly address   the serious mismatch between what are being produced by our formal educational institutions and the  actual demand for specific skills in the workplace.  It has been ironical that, despite an abundance of young manpower, there is an acute shortage of construction workers for the Build, Build, Build program of both the public and private sectors.  The pandemic has been some kind of cold shower waking up both parents and the youth to the harsh reality that a college diploma is not a guarantee to employability and that they have to get rid of their bias against blue collar work.  The pandemic is also getting workers at all levels (including the managers and executives themselves) to quickly upgrade their digital skills or perish.

CHANGING WORLD

Have I lost my optimism about the future of the Philippine economy?  This is a question I have been asked by friends when they compare my GDP forecast for 2021, which is at 4.0 percent, to others which can range from 4.70  percent (ING Bank)  to as high as 7.60 percent (Fitch Solutions), the median of  14 forecasts being 6.55 percent.  Why have I temporarily relinquished my usual monicker as the “prophet of boom”?  The plain and simple answer is that I foresee that our Government (both at the national and local levels) will continue to do a poor job of handling the COVID-19 pandemic.  If we had the worst GDP performance of a negative 9.5 percent  in the whole of East Asia for the year 2020, it was mainly because we had the longest lockdowns and the slowest response to the pandemic.  I have reasons to believe that we have not seen the worst of the negative impact of COVID-19 on the Philippine economy.

CHANGING WORLD

There is nothing wrong in the desire of those who drafted he Constitution of 1987 to ensure that the “national economy is effectively controlled by Filipinos.”  This is authentic nationalism.  Limiting equity ownership of foreigners in strategic and capital-intensive industries, however, is not the only and rather a weak measure to ensure effective control of Filipinos of the national economy.  The State, the ultimate protector of  the common good of Philippine society, has many means of controlling the behavior of enterprises owned by a majority of foreign interests.  Through the Philippine Competition Commission, any monopolistic or oligopolistic act of a foreign-owned company can be penalized.  The raising of prices to unreasonable levels by these corporations can be prohibited by legislation or by an executive decree during times of crisis.  Any abuse of our human resources by foreign companies can be sanctioned by labor laws.  It has also been demonstrated that there are sectors where enterprises fully owned by foreigners have played second fiddle to  strong and mighty enterprises   owned by Filipinos, such as United Laboratories in the pharmaceutical industry, the SM Group in retailing, San Miguel Corporation in food and beverage,  ICTS in international logistics, and many others.  There is no need to limit foreign equity participation in such sectors as telecoms, airports, educational institutions, media and other public utilities to ensure that the national economy is “effectively controlled by Filipinos.”

CHANGING WORLD

Those who are objecting to the removal of the restrictive economic provisions in the Philippine Constitution of 1987 are well intentioned nationalists.  They are actually faithful to the spirit of what the majority of the members of the Constitutional Commission of 1986 imbued in the final draft of the Constitution that was ratified by the Filipino people in 1987.   This spirit is embodied in the  phrase that appears in the Declaration of Principles:  “The national economy shall be effectively controlled by Filipinos.”  As the Chairman of the Committee on the National Economy of the 50-member Commission, I beg to disagree that  the economic provisions of the Constitution  were able to promote the national common good by limiting vital economic sectors of the economy to Filipino citizens.  It is about time that we redefine economic nationalism as meeting  the needs of the Philippine economy in the twenty first century.  The evidence is so clear that limiting the ownership of large, capital-intensive industries to Filipinos or enterprises with majority Filipino ownership has nothing to do with Filipino-First but is actually equivalent to “Rich Filipinos First and damned the rest of us, especially the poor.”  Only the very rich Filipinos belonging to the top one percent of the population in terms of income class can afford the capital needed by such capital-intensive sectors as telecoms, airports, public utilities, media and higher educational institutions.  That is why we continue to have an elite economy.  To make matters worse, by limiting the majority ownership of these strategic industries to Filipinos, we are unable to capture much needed long-term capital from abroad, making it harder for the economy to address the problems of massive unemployment and dehumanizing poverty among the masses.   We cannot talk about the common good or the national good of Philippine society without giving the highest priority to eradicating mass poverty.

The winning of the economic marathon by the Philippines over the next decade or so will be further made possible by major reforms in the  educational system.  Parents and the youth must be convinced that their chances of being gainfully employed will increase significantly if they take less interest in diploma-oriented college courses in the traditional universities and colleges that have proliferated in the Philippines—aping the American model.  They should be taking technical courses that will prepare them for employment in the construction industry, health and wellness sector, agribusiness sector, tourism and travel and other labor-intensive industries which do not require college diplomas but practical skills that are better honed in technical institutes modelled after the European educational institutions when Europe was in  a stage of development similar to where we are now.  For example, the educational institutions owned and managed by one of the largest investors in education, the PHINMA group, are really more technical in nature, producing people for the security industry ( i.e. courses in criminology), health and wellness, and other technically-oriented rather than purely academic courses.  There should be more schools for sea farers, care givers, automotive repair and maintenance workers, electro-mechanical workers, etc. like those produced by such schools as DUALTECH in Canlubang, the Centre for Industrial Technology and Enterprise (CITE) in Cebu, MFI Institute in Ortigas, and in-house training programs put up by  firms like the DMCI group, the Makati Development Company, the Monark Equipment Corporation, the Transnational Diversified Group, the Magsaysay Lines, etc.  It is hoped that the major restructuring of Philippine education that will result from the pandemic will de-emphasize the pursuit of a college diploma for its own sake but will lead to greater interest in the cultivation of  practical skills needed by an industrializing society.

CHANGING WORLD 

This bright long-term forecast of CEBR is only one of the many optimistic prognostications of independent think tanks  and financial institutions about the long-term future of the Philippine economy.  Within the last year or so, the Philippines was rated by the Oxford Economic Institute to be the second most attractive emerging market in the next decade or so, next only to India and ahead of Indonesia and China in third and fourth places, respectively.  It was ranked by The Economist publication as the sixth in financial strength ahead of countries like Vietnam, Thailand and China.  The Japan Credit Rating Agency upgraded its credit standing  to triple B Plus.  These and other long-term projections of a bright prospect for the Philippine economy are based on strong fundamentals that are literally immune to the damage done by COVID-19 whose impact on the Philippine economy will be short-lived.

Anyone who wants to “contribute to the common good” of Philippine society cannot go wrong if he or she starts planting trees, either as an ordinary citizen, a civic leader, a government official, a businessman, a social entrepreneur or in any other capacity whatsoever.  There is so much evidence that trees have a lot to do with sustainable development and integral human development.  As has been demonstrated by abundant studies sponsored by international organizations, such as the United Nations, “deforestation and desertification—caused by human activities and climate change—pose major challenges to sustainable development and have affected the lives and livelihoods of millions of people.  Forests are vitally important for sustaining life on Earth, and play a major role in the fight against climate change.  Investing in land restoration is critical for improving livelihoods, reducing vulnerabilities and reducing risks for the economy.”