Business NEWS

One aspect of “re-envisaging” the social function of property is the way we apply this principle to the globalization and anti-globalization issues that characterize our era.  In Paragraphs 121 of Fratelli Tutti, he asserts:  “No one then can remain excluded because of his or her place of birth, much less because of privileges enjoyed by others who were born in lands of greater opportunity. The limits and borders of individual states cannot stand in the way of this.  As it is unacceptable that some have fewer rights by virtue of being women, it is likewise unacceptable that the mere place of one’s birth or residence should result in his or her possessing fewer opportunities for a developed and dignified life.”  The developed countries especially must not completely close their borders to the millions of hapless citizens of other countries who are suffering from the ravages of civil wars, natural disasters and other calamities that force them to immigrate to more hospitable environments.  It is also intolerable that natural-born citizens of a nation will persecute immigrants in their own lands, as is happening in the United States where Asian Americans are objects of hatred and violence.  Pope Francis is appealing to these natural born citizens of developed countries, whether in America or Europe, to practice preferential option for the poor, not only as individuals but also as nations:   “Development must not aim at the amassing of wealth by a few, but most ensure ‘human rights—personal and social, economic and political, including  the rights of nations and of peoples.  The right of some to free enterprise or market freedom cannot suppress the rights of people and the dignify of the poor, or, for that matter respect for the natural environment, for ‘if we make something our own, it is only to administer it for the welfare of all.’“  Clearly, these words in no way are advocating the abolition of private property but the responsible use of property for the international common good.

In Fratelli Tutti, Pope Francis clearly states that the common good cannot be defined in terms of majority opinion.  This would be tantamount to moral relativism.  He writes:  “The solution is not relativism.  Under the guise of tolerance, relativism ultimately leaves the interpretation of moral values to those in power, to be defined as they see fit.  ‘In the absence of objective truth or sound principles other than the satisfaction of our own desires and immediate needs…we should not think that political efforts or the force of law will be sufficient.  When the culture itself is corrupt, and objective truth and universally valid principles are no longer upheld, then laws can only be seen as arbitrary imposition or obstacles to be avoided…Relativism always brings the risk that some or other alleged truth will be imposed by the powerful or the clever.  Yes, ‘when it is a matter of the moral norms prohibiting intrinsic evil, there are no privileges or exceptions for anyone.  It makes no difference whether one is the master of the world or  the ‘poorest of the poor’ on the face of the earth.  Before the demands of morality we are all absolutely equal.” 

I have to apologize for the sensationalist tone of the title.  I just want to highlight the fact that some ultra-conservative Catholics in the US and elsewhere  have developed the bad habit common to some of our military and police of red tagging anyone who is speaking and acting for the poorer members of society.  I am referring to an article I have just read entitled “I’m Catholic.  Can I Disagree with Pope Francis on Property?” by John Horvat II, a  leading Catholic Conservative in the U.S. who wrote a best seller “Return to Order:  From a Frenzied Economy to an Organic Christian Society.”  To be sure, Mr. Horvat has been helping the Catholic Church in the U.S. spread more widely the social doctrine of the Church. He also has been a major critic of many immoral policies of the U.S. government that have been accentuated under the presidency of Joseph Biden such as abortion, same-sex unions, and contraception.  Unfortunately, however, he has grossly misunderstood the teachings of Pope Francis in his recent social encyclical entitled Fratelli Tutti (All My Brothers and Sisters), especially as regards the social role of private property.

True, an increasing population makes it more difficult to eradicate mass poverty. The Philippines still has the highest poverty incidence of close to 20 percent in the whole of East Asia.    The answer, however, is not to prevent births but to implement positive measures of transforming the humans being born into hands that can work and minds that can think and most of all into hearts that can unselfishly serve others.  Those positive measures have been identified by our leaders and are already being implemented to one degree or another.  We just have to persevere in carrying them out.  Among them is  focusing much more on rural and agricultural development.  The vast majority of the poor are in the rural areas which need more farm-to-market roads, irrigation systems, post-harvest facilities and many other resources that can help the millions of farmers, especially rice, corn and coconut farmers, improve their incomes.  We should give as much financial and technical assistance possible to the millions of micro, small and medium-scale enterprises (MSMSEs) that constitute 99 percent of business outfits.  We should invest more of the government budget in public education and public health.  To obtain the necessary funds for these pro-poor expenditures, we should increase the taxes on the wealthy  and on non-essential consumption (such as the so-called “sin  products” like liquor and cigarettes) so that the corresponding revenues can be used especially for Social Amelioration Programs for the poorest of the poor who do not benefit from free market forces. Those below the poverty line are too undernourished, too uneducated, and too unskilled to be able to participate actively in the market, whether on the demand or supply side.  We should encourage both the private sector and the State to invest, with the help of foreign capital from abroad, in labor-intensive industries and services.  These are time-tested solutions all over the world to reducing mass poverty. especially proved successful in the last twenty years in China that was able to reduce its poverty incidence to zero in just one generation. Another country we can emulate in this respect is Vietnam that just surpassed us in income per capita last year.  But more importantly, Vietnam has reduced its poverty incidence to close to zero by implementing the policies and programs enumerated above.

The news about agriculture during the first quarter of 2021 reminds us that the road to improving agricultural productivity in the Philippines will be long and difficult.  Agricultural production dropped by 3.3 percent, especially due to the large decline in production of livestock and poultry, with hog production shrinking by a whopping 23.2 percent.  The saving grace was the increase in crop production of 3.3 percent.  This development is in contrast with what happened last year when agricultural production increased in both the second and third quarters as the other sectors of the economy, industry and services, were experiencing double-digit decreases.

 The environmentalist affirms that a small population is good news because it would decrease the carbon footprint on our planet.  Mr. Grantham, who is  co-founder of GMO Asset Management,  deflates such optimism.  He said that to fight climate change, we still have a long way to decarbonize global industrial systems and reduce CO2 in the atmosphere to its pre-industrial level of 280 parts per million from its probable future peak of more than 550 parts.  This very ambitious target can only be achieved if the world can come out with every biological and mechanical innovation of which it is capable.  Unfortunately, lower economic growth caused by a shrinking and ageing population would surely weaken, not only the necessary innovation and investment, but also the resolve to do it.  Much fiscal resources and regulatory reforms would be needed to get the job done.  A nation on irreparable demographic decline and rapid ageing will not have the fiscal resources nor the political will to do what is necessary to combat the negative impact of climate change.

The pandemic has highlighted the greatest economic treasure the Philippines has, its human resources.  We continue to have a young, growing and English speaking population that is referred to as our demographic dividend.  In contrast, all developed countries as well as some of the emerging markets in Asia like China, Thailand, Vietnam and Indonesia are already showing signs of rapidly falling fertility rates and ageing that can dampen their economic growth in the next decade or so.  Heavy pressures on pension funds and social security systems, labor shortages, and dwindling domestic markets are already worrying the leaders of even the most populous country in the world, China.  Because of unwise population control programs in the past, China is already rapidly ageing before becoming rich.  We should be thankful that population control programs that some of our past governments tried to impose were not successful.  Our population today of close to 110 million is still expected to swell to 142 million in 2045 according to the Philippine Statistics Authority.  We will still be experiencing population growth of 0.65 percent annually during the 2040 to 2045 period.  Our East Asian neighbors will have fertility rates much below the replacement level of 2.1 births per woman. These low birth rates are coupled with  an ageing population in which those who are over 65 account for  20 to 30 percent of the  total.   For example, Japan and South Korea are predicted to see their population drop by more than half by the end of this century.   In contrast, even in 2045, Filipinos over 65 will be only 11.4 percent of the total, resulting in a ratio of young to old that will still be very manageable.   Because of very low fertility rates and  a high percentage of the population over 65 years of age,  our Asian neighbors (not to mention countries in the European Union) will be  weighed down economically by a huge proportion of senior citizens and very few workers to take care of them  This will require these countries  to open up to immigrant workers like our OFWs, with the consequent cultural  and social frictions we are now witnessing even in so-called democratic America where some of the most productive citizens, the Asian Americans, are objects of discrimination and hatred.

Another important reason why the Philippines (together with the other ASEAN countries) should try hard to have friendly relations with China, despite its provocative behaviour, is its vast domestic market for our exports.  As mentioned above, in PPP terms, China’s domestic market is already larger than those of the US and other large countries in the developed world.  China is already the third largest export market for the Philippines after the U.S. and Japan.  Our largest export to China comprises electrical and electronic equipment, followed by machinery, nuclear reactors and boilers; mineral ores; and edible fruits.  With the huge domestic market of China today and the prospects for growth of 6 percent or over at least in the next decade, it is highly probable that China will be our number one export market by 2025.  If we do everything possible to improve the productivity of our agricultural sector, especially in such high-value products like vegetables and fruits, the Chinese market for these will be almost unlimited as more and more of their population join the middle-income categories.  With the rapidly ageing population of the Chinese, we can also aim to send very well- paid health workers, care givers and teachers.  It is, therefore, very important that we are able to maintain friendly relations with China, despite the political challenges.

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.

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