Monday, July 31, 2006
IF statistics could only be eaten, or provide us jobs where we could derive money from, this country may yet be the most prosperous in the world.
Regularly, government agencies are releasing figures hinting that things are improving, that exports are rising, investments are increasing, the budget deficit going down, jobs are being created, and economic growth has been robust-yet ordinary citizens are always wondering why life seems to be getting more miserable, living standards are slipping, commodity prices are skyrocketing, and every thing in the country seems to give us this sinking feeling.
Why is this so? Well, statistics are cold and abstract and what they measure at the social levels are events or phenomena that are largely incremental and therefore subtle. For instance, a 5-percent to 6-percent growth rate in the gross domestic product, especially if driven by the services sector, is not likely to create factories that would soak up the bums in the neighborhood. Yet we believe that the real factor could be lack of credibility of most of these statistics. One possible reason is that outside observers could hardly verify the veracity of these statistics.
Take the Philippine Economic Zone Authority (Peza). Periodically, Peza issues press releases about its export performance, investments accumulated and jobs generated. The reports are always glowing, as if overnight the Philippines has become an investment haven. But try verifying the statistics by asking for details at the firm level, something that the Board of Investments (BOI) does quite openly, and a researcher will encounter resistance. Try asking from them if they have basic data on rental rates, utility rates and other harmless information and they will tell you these are not available. “Try asking each ecozone,” they will say. These are perfectly public documents, and perfectly neutral they are almost useless, yet one can hardly get them from Peza.
If the BOI can provide this basic information, why can’t Peza? Is it hiding something? Is it fudging data and doesn’t want the public to know the real score? Maybe so, maybe not-but there’s no way to know because they are so secretive for reasons only God and the Peza’s conscience knows why.
Lately, Peza issued a press release saying investments in economic zones had increased 13 percent from P25.91 billion in the first half this year from P22.287 billion in the same period last year. Great!
Then the other day, the Department of Trade and Industry released another report saying investments generated by both the BOI and Peza actually went down 20 percent. Question: what agency are we supposed to believe? Should it be DTI or Peza?
Well, the truth is that investments are indeed declining significantly, contrary to the glowing press releases of Peza. That is, if we believe the reports of the Bangko Sentral ng Pilipinas (BSP). People are probably inclined to believe the BSP people, as they are the ones that count the real money, unlike BOI and Peza, which only count promises of investments. Promises!-and yet Peza is guarding its secret like crazy.
In fairness, the Peza seems to be very popular among its clients, largely the executives of companies located in these ecozones. Or at least, its website says so. But that’s expected because these companies are enjoying lots of fiscal incentives being doled out by the agency. Or maybe it’s a really, really good agency in delivering services to companies doing business in the Philippines. But Peza is also a public agency tasked to perform certain social functions and therefore the public, including the media, is also among its important clients. As a public institution, it is duty-bound to be transparent. Ultimately, it’s only in transparency and openness where its true worth to society can be weighed. Lately, the Senate has come up with a new bill dissolving Peza and forming a new one to supersede it. Which leads one to ask: if Peza is such a knight in shining armor, why are the senators dumping it?
Tuesday, July 25, 2006
THE Philippine Chamber of Commerce and Industry (PCCI) on Tuesday stressed that the country needs more reliable and affordable energy and such requires a broader ownership of privatized power assets. Supporting the National Economic and Development Authority (Neda), the PCCI also said government should put stricter limits on the cross ownership between power generation and distribution utilities in order to prevent pockets of monopoly in the power sector.
“It is necessary for both industry and consumers to have access to affordable power to lower the cost of business. And for this to be possible, the privatization effort of the National Power Corporation assets must have broader ownership base,” said Donald Dee, PCCI’s president.
One couldn’t agree more. Certainly, this is a principled stand on the part of PCCI, which should be commended for saying so. For so long, the country’s economy has been hobbled by monopolies and oligopolies, one of the major factors why we find it hard to improve the lives of the Filipino people.
Standard economics textbooks tell us about the evils of monopoly: their tendency to produce shoddy but expensive products and services. That is bad enough, but the heavier burden lies with the fact that monopolies are a drag to development, either because they tend to discourage competition or they deprive people of the vital goods and services they need to improve their lives.
Take telecommunications. Before deregulation, anybody who wished to have a landline telephone would have to wait for four years before getting one. Entrepreneurs therefore had to be “entrepreneurial” by buying the telephone lines of those who already had. Others had to share a “party line” and had to quarrel with them all the time for a chance to make or receive calls.
That was then. Now, almost everybody has a cellular phone, to the extent that phone companies must offer all sorts of inducements for landline subscribers, including super-low fees and quick (sometimes, “one-day”) processing. Imagine, from four years to one day. What a difference reform makes.
Still, the issue today is that the country could have progressed a lot more had the entire telecommunications industry been totally open to foreign investments. Today, we are no longer talking about monopoly but oligopoly or an industry dominated largely by two or three players. Had the industry been open just to anybody who wants to come in, Internet penetration could have increased, value-added services like voice-over-internet-protocol would have been common, and the brave new world of information revolution could have unfolded a lot faster to transform our lives for the better.
Indeed, what the country needs right now is a second wave of reforms that were started after the Edsa Revolution.
After the fall of Marcos, we saw the end to monopolies in sugar and coconut trading, telecommunications, and aviation. We had limited reforms in banking and retail. We allowed private participation in infrastructure development and water distribution. We liberalized international trade and reduced tariff and nontariff barriers to force our own industries to grow, mature, and become competitive. Somehow, Filipinos are reaping the benefits of these reforms through relatively lower inflation rates (which preserved much of the people’s purchasing power), greater options for consumers, and greater access to information technology. The privatization of the water distribution has hit a snag with the failure of the Lopez family and its partners to make their water concessions work and had to seek a bailout from the State. Nevertheless, water supply in general has ceased to become a daily gripe of Metro Manila dwellers, thanks to the better performance of Manila Water, and the increasing availability of potable water in general.
Nevertheless, the reforms are not enough because the post Edsa reformers failed to finish the job, either owing to ineptness or the stronger backlash from the country’s oligarchs, or, in some cases, a failure to draw the right kind of foreign investors or partners—meaning, flashy with no real money, technology or expertise and experience. Retail has remained the preserve of a few mall owners, thus discouraging the entry of foreign competitors that could have put greater pressures on local players to reduce prices and offer better or innovative services. The banks continue to behave like cartels, offering low uniform savings rates, while charging high interest rates to borrowers and credit card holders, thus turning off savers. Exporters and integrators continue to complain of high freight rates, saying it’s cheaper to buy corn from
We need to pursue this second wave of reforms to improve the Philippine economy’s competitiveness and efficiency. There’s no other way this country could move forward as the results of the first wave of reforms following the Edsa Revolution seemed to have exhausted its promise. For long, wealth creation by the country’s economic elites has largely been through extra-economic means or political connections and undeserved favors from the state (like state-guaranteed monopoly or oligopoly position through high tariff walls, “fiscal incentives,” restrictions on foreign investments, among others). A second wave of reforms that will force the country’s economic elite to behave based on the dynamics of the market and competition would force them to be innovative, thus raising the entire country from the rut that we are trapped in right now.
Monday, July 24, 2006
WILL the government please stop crowing about the country’s 5-5.5 percent GDP growth rate achieved in the last few quarters?
Listening to the official town crier, it’s as if that level of growth we have achieved so far already corresponds to some satisfactory definition of the Promised Land. Well, the most conservative economist in this country, Dr Bernardo Villegas of the University of Asia and the Pacific (UA&P)—and also the most optimistic—said we need to grow 7-9 percent in order to raise the country’s living standards.
Last week, economist Josef T. Yap, president of the Philippine Institute for Development Studies (PIDS), a semigovernment think tank, said the 5- percent growth rate shown by the economy in the last several quarters proves that the Philippine economy is out of crisis. Nevertheless, at that level of growth, the Philippine economy has only been muddling through. The Philippine economy, he said, needs to grow as fast as
In short, the threshold is 7-9 percent GDP growth rate. Less than that level of growth means we are in the same old kangkong economy—no offense meant to the lowly but nutritious leaf!
In the 80s through the 90s, when the Philippine economy could barely muster 3-4 percent, a 5-6 percent growth rate was almost a dream for the country. That was when the toast of the world were the tiger economies of
In the last 10 quarters, the Philippine economy has shown itself capable of growing at 5 or even 6 percent, owing to the continuing robustness of the dollar remittances from overseas workers, business process outsourcing, agriculture, and the transportation and communication subsectors. This figure, however, came at a time when the rest of the region, particularly
We are not playing down these seemingly decent growth rates. In fact, we acknowledge that these growth rates were rather fantastic given the extraordinarily difficult circumstances Filipino entrepreneurs and ordinary citizens are in. High power rates, an inept and corrupt bureaucracy, political instability, recurrent coup threats, the killings of political activists—they all continue to cast a shadow on the political landscape and it’s just so difficult to expand business and create anything in such a poisoned atmosphere. Added to this burden is the continuing deterioration of the country’s infrastructure because of the government’s continuing failure to invest in infrastructure development. Government, of course, has the money but it would rather use such resources in silencing or buying off critics, including the bishops, rather than spending them in an honest-to-goodness infrastructure development program.
The point being stressed here is that current growth rates have largely been achieved despite the worst of times. The credit goes to the private sector that has been doggedly doing business despite the odds, entrepreneurs in the outsourcing business who have been persistent despite the difficulty of finding English-speaking staff, the farmers tilling the lands despite the perennial lack of rural infrastructure and support services, and the OFWs who continue to send the money home despite high transactions costs. But their efforts are largely not enough to raise the economy to greater heights. And it would serve no purpose for the government to brag about it because the government does not even have any contribution to such modest improvements in the economy.
For a long time, some people in the private sector, sick and tired of the political deadlock, have been saying that all the country needs to do is stop minding politics and focus its energies on business. To some extent, that is correct. However, the current situation shows that private sector efforts could only do so much. There is a limit to what they could do. The government should take its responsibilities to heart by putting more resources and energy to building up economic infrastructure and competitiveness. Economic infrastructure is necessary to free up more entrepreneurial energies from the private sector. Of course, the government will have to address the sense of drift that is plaguing the country. It has to inject a new vigor, a sense of direction, and dynamism that should inspire investors and entrepreneurs. This should have been done decades ago, but it’s never too late to embark on such a program—and soon!
Monday, July 17, 2006
THE call center industry here in the
It’s the only industry in the world where recruits get paid even before they start working. That’s nice really, except that they just actually hire from each other. Most call centers these days are transforming each of their staff members into petty headhunters by dangling 3,000 to 10,000 prize money for each staff recruited. And who do these people usually recruit? Their friends and former classmates who happen to work in a call center in the adjacent buildings. They even send recruiters into the foyer of each other’s buildings to distribute calling cards just in case a call center agent would be interested to transfer. At the rate they are doing that, one could actually accumulate cash and build a “career” playing rigodon with different call centers.
Certainly that is a funny story. But it’s not funny when you think of the consequences.
First, call centers are encouraging job-hopping and high attrition rates. That’s a prescription for disaster. Second, it sends the wrong message to potential investors who are thinking of investing in the
And yet, most of these call centers must share the blame for this sorry state of affairs. By resorting to cut-throat competition in hiring, they have encouraged their workers to be footloose, nay, even to consider jobhopping as a virtue, and the traffic in jobhoppers as a lucrative sideline. Now, karma has caught up with the “pirates.”
More crucially, they hardly invest in the training of their staff. They don’t provide them career track, no employee retention plan, no long-term human resources plan. They don’t give their employees the chance to dream with them. Ask any call center agent these days if they intend to make a career out of call center work and most of them will say it’s just a temporary job for them until they find a “real job.” These people of course are in their early twenties who are still figuring out the meaning of their lives and their own places under the sun. But the real reason for their vagueness about their plans is that their employers simply look at them as a blur in the outsourcing horizon who come and will soon be gone. Getting this signal from employers, why should they then consider themselves as having a long-term stake in one call center?
The huge mistake of call centers here is that managers have simply copied the human resource strategy in the
It’s good that other cyberservices industries are wise enough to really think through, this early, their human resource strategy. Lately, we have heard about huge companies doing back office operations here that are really investing huge money to train their staff. They give them hope and let these young people dream dreams with them. Yes, some even sending their staff to take master’s degrees abroad. No wonder back-office operations businesses are currently growing like mad. In the first half of this year, about 7 out of 8 new huge investments in outsourcing in the country were into back office operations or shared services.
Of the eight new investments only one is a call center—too bad because we need more of them to create more jobs. Right now, the entire cyber services industry employs almost 200,000 people. Government hopes the industry could accumulate about a million jobs by 2010. Without new big-ticket call center projects, however, we can hardly achieve that target.
But one should not wonder for this less interests from investors to put money in call centers. In the last few months, Newsweek and Asia Times Online were quoting executives of call centers complaining about the skills crunch in the country. Surely this information has negatively affected the decision of investors to rethink setting up shop in the country.
Certainly, the complaints about the deteriorating English-language skills and the poor school system are valid. The government indeed should do something about it. But call centers should do their own homework by adopting a better human resource strategy, investing in skills training, providing career tracks for their staff, partnering with schools and universities, and looking at their employees as a precious resource. They should continue pestering the government about the investment environment but they should also exert all efforts to develop concertedly the industry’s human resource. After all, they are the ones who are going to rake in money should their operations succeed.
Call centers should stop whining and get real.
Thursday, July 13, 2006
LET’S be happy that the Japan Credit Rating Agency, Ltd (JCR) has recently upgraded the country’s foreign currency rating from BBB-/Negative to “stable.”
Theoretically, an upgrade means that the country could borrow money at favorable terms, thus reducing the cost of capital needed to boost the performance of the Philippine economy. The JCR identified three positive factors for the rating, namely, good policy management, relatively stable economic performance, and relatively sound foreign liquidity position. Other positive factors cited include a 5.5-percent growth rate in the first quarter, the recovery in exports, and a slight decline in fiscal deficit in January to May this year. JCR has also identified several lingering problems like political instability, weak fiscal position, and poverty but, apparently, the ratings agency thought the positive outweighs the negative.
It’s actually the second upgrade from JCR this year. In April, JCR had upgraded its ratings for the country’s domestic currency from BBB-/Negative to stable, owing to factors like President Arroyo’s survival from impeachment charges and coup attempts, and the implementation of the expanded value added tax.
That’s one rare good news that Filipinos need to savor because, in a sense, the upgrade could also trigger an improvement on how foreign investors look at the
What is funny though is the government’s reaction to the new ratings. No less than President Arroyo herself said that the new rating is proof of the soundness of the tough economic decisions she had made to improve investor confidence in the country.
In truth, there’s nothing really there to indicate that improvements in the economy were due to government policy decisions. Factors like “good policy management” sound so hollow in the face of the government’s failure to pass the budget, its inability to provide leadership for the passage of the fiscal rationalization bill, and its continuing failure to provide money for infrastructure development.
“Stable economic performance” is certainly valid with the 5.5-percent growth rate in the first quarter and it seems the trend is likely to continue in the second half. Again, its something that could never be credited to better governance as the growth figure has, in the last 10 quarters, largely been underpinned by the ever-growing dollar remittances from overseas Filipino workers.
The recovery in exports simply reflects the recovery of global demand for electronics that comprise more than 70 percent of the country’s exports.
Investors have been complaining about the country’s rickety infrastructure and yet our national income accounts reflect the government’s continuing failure to boost investments in much-needed roads, bridges, schools, research and development that are needed to enhance competitiveness. Same with “sound foreign liquidity position”—it’s all about rising remittances from people who in the first place have escaped the
The ratings upgrade, therefore, is really just a case of people trying to make the best out of everything regardless of constraints. To some extent, the Philippine economy has developed certain firewalls against the political turmoil. However, this is largely due to the growing globalization of certain sectors of the Philippine economy, a trend that has nothing to do with how well the government runs the affairs of the state. In fact, these globalized sectors of the economy—exports, migrant labor, outsourcing, among others—could have grown a lot faster had poor governance not got in the way.
The key factor that could really make a difference is improvement in governance and, sadly, they remain in the “negative” side of the balance: political instability, weak fiscal position, lingering poverty, among others.
Are there clear efforts to effectively address the inadequate infrastructure system? Are there consistent efforts to reform and upgrade the education system? Are there sincere efforts to address leakages in tax collection system besides imposing more taxes? Are there consistent efforts to address poverty? These are all questions that the government needs to show good records on before it can really claim credit for improvements in credit rating.
Monday, July 10, 2006
It’s nice to hear that the government, particularly the Department of Agriculture and the Department of Science and Technology, are getting serious about biopharming. They have made the right move; it might just be among the most important things that could really make a difference in our sisyphian struggle for progress, respect, and recognition in the global community of nations.
We are not hyping here. No less than Henry Miller, biotechnology expert and a fellow at the Hoover Institution and the Competitive Enterprise Institute would attest to the
Biopharming refers to the use of “gene-splicing” techniques to program common crops plants like rice, corn, and tobacco to synthesize high-value-added pharmaceuticals. Plants are harvested and the drug is then extracted and purified for various applications including vaccines for certain ailments like typhoid fever, rabbies infection, and human immuno deficiency syndrome (HIV) as well as chemicals and lubricants.
In a dialogue with the local media a few months ago, Miller said that the
Recently, the DA has announced the successful production of the “Super Buffalo” through cloning as well as the development of pest-resistant variety of eggplant, better-tasting and faster-growing bangus (milkfish) and tilapia, vitamin enriched rice, and virus-resitant coconut and tomato.
In summary, the
Remember that the
These industries are providing millions of jobs but by themselves they are not yet strong enough to soak up joblessness in the country. Simple: electronics and semiconductors are highly import-dependent; they don’t have significant linkages with the rest of the economy, thus constraining their job-creating capabilities. Also, jobs in the services sector are urban-based and require highy-skilled professional and technical staff, thus limiting the benefits of the sector’s its impressive growth to the professional and the middle classes. This trend suggests that other sectors, specifically the farm sector, should step up and provide more contributions in terms of value added and the creation of jobs. And what better way to achieve this than a more serious drive for excellence and competitiveness in biotechnology, particularly biopharming?
With biopharming, the country could have two birds in one shot. Surely, a vibrant biopharming industry could mean greater involvement of the rural sector while mobilizing the talents of the country’s pool of scientists.
Time is of the essence here. In the last few years, the
Monday, July 03, 2006
BY the looks of it, the
Certainly, it’s so easy to blame members of the European Union, particularly France, for their reluctance to reduce agricultural trade barriers and subsidies that are hurting lots of farm exports from the developing world. They actually offered to cut farm tariffs by 40 percent, but with the caveat that they be allowed to put at least 160 products into the sensitive list, thereby making these products beyond reform. The Americans also share the blame for not showing leadership in the trade negotiations at a crucial time when the rest of the developed world is having problems with the recent successes of
But certainly, the blame really should be equally shared also by the major players like
One should note that
Where does that leave the
That’s a pity because the collapse of the
One might ask that if indeed “free trade” is a win-win situation, as its advocates would say, why are these countries that are supposed to benefit most, the ones that won’t budge to make way for the successful conclusion of the Doha round?
Simple: it’s politics. All countries joined the WTO with a clear understanding of the economic benefits of trade liberalization and globalization but they do come to the negotiating table behaving like 18th century beggar-thy-neighbor mercantilists. Negotiations are like theaters where negotiators play to a gallery of lobbyists and interest groups at home. Their performances are judged by the concessions they gain and not the compromises they made to make the entire process succeed.
But ultimately, those talks are likely to revive again once the new crop of political leaders with fresher mandates and less political trauma rises in a year or two after new rounds of elections. The $300-billion rise in global exports is just too huge an economic benefit for global trade to miss. That means the Philippines should look at the lull as a period to strengthen the country’s competitiveness by building economic infrastructure like irrigation, road, bridges; introducing more competition in inter-island shipping to reduce cost and enhance efficiency in the economy; and reviving the education system. Yes, the failure of the
Sunday, July 02, 2006
OUR policymakers are probably thinking that the current diaspora of nurses is all about nurses and doctors leaving the country in droves, which is bad enough. Recent information gathered by the Research Staff indicates that there are now certified accountants, lawyers, cops and former cops, engineers, remote sensing experts, computer programmers, mathematicians, statisticians, teachers, biologists, soldiers, journalists, and bankers who are taking up nursing.
In short, it’s practically the entire professional class—the knowledge workers—who are taking nursing and we could assume it’s just another way for them to escape the
One day, our business and political leaders will awake to find the best brains around are no longer there—gone to all those nooks and crannies of the world where their talents are more appreciated and their future secure. Yes, even if part of the price they pay for this is to give up their original professions to take up the skills more marketable in the world, nursing. That scenario is not just a nightmare of perception—it would be bad for a Philippine economy that has been muddling through, because the skilled workers who have a better chance at getting it out of this rut will no longer be there.
Certainly, economic factors are one of the main driving forces for this trend of professionals leaving both country and careers just to be nurses. After all, this is the brave new world of globalization where borders are crumbling and dreams for betterment are no longer constrained by friction of distance. But knowing the character of the Pinoy—the love for the family, romantic attachments to friends and sweethearts, the penchant to hang around with barkadas—the professional Pinoys wouldn’t leave if only he or she still sees good prospects for economic and social mobility in this country. Apparently, with the constant bloodletting—literally in the streets as killings go on with impunity, and symbolically, ub the political arena, the professional Pinoys don’t see anything promising or worth staying for.
In short, the diaspora of the professionals is an indictment of the entire country as a system. The System can no longer respond to their dreams and to their aspirations for a better life for their offspring. The ideals of serving the Motherland have been totally replaced by a desire for sheer survival. And who can blame them? When prospects are dire, one could only think about the family; and the prospects of seeing one’s child suffer the same sense of hopelessness is enough to drive every Filipino to foreign shores.
In fairness, the Philippine economy has been growing pretty well in the last 1- quarters. The 5-6 percent is quite decent, but economists like Dr Joseph T. Yap of the Philippine Institute of Development Studies (PIDS) say that that level of economic performance is not enough to improve the Filipinos’ standard of living. That growth rate,
But there are actually a lot of things that the government and the private sector could do to lessen the number of professionals escaping to foreign shores. For instance, there’s really a great need for the private sector and the government to review the way we determine wages. For so long, politicians and bureaucrats have thought of the minimum wage workers whenever they adjust workers’ pay in response to economic shocks like the sudden rise in oil prices. Since the pay scales of skilled professionals are always a little bit higher than the minimum wage rates, they are usually excluded from the wage adjustments despite their strategic and greater contributions to their companies and organizations. Thus, over the years, the pay levels of skilled professionals have been deteriorating in real terms, forcing them to seek employment opportunities abroad.
At the surface, business leaders don’t notice this disillusionment among their knowledge workers because, as usual, they report to office in their Sunday best. But increasingly, many of them are leading secret lives: knowledge workers by day and nursing students by night. And on free time and weekends, they trawl the internet job sites for the latest job offers abroad, scan job advertisements in newspapers, hoping they could find that all-important break. And someday, because they are skilled people, many of them might just succeed.
Sad but true. It’s time policy and decision makers both in the government and the private sectors come to terms with this problem before it’s too late.