Thursday, December 07, 2006

Global warming creates uncertainties for the Philippine economy


ARE we prepared for the new reality fostered by global warming? That’s a big question we should ponder as we count our losses, bury our dead and try to get back on our feet after Typhoons Reming and Milenyo.

It’s a material question since it seems we haven’t seen the last of these supertyphoons that pack winds strong enough to peel off roofs and destroy much of our budding hopes for a better future. It’s a new reality that we need to confront squarely if we want to sustain the economic momentum of the last three years.

Prior to Milenyo, observers said the Philippine economy was “on the mend” and cited the upgrades in sovereign rating, the all-time highs in the stock market, the double-digit growth rates in exports, and the improving tax collection of the government. In fact, before the supertyphoons, top Neda officials were walking around with PowerPoint presentations projecting the economy as headed for a continuous climb to a 5.5-percent to 6.2-percent growth rate this year.

Neda was confident of attaining such growth targets as the economy, its top officials kept saying, has new growth drivers—electronics, outsourcing, crop production and agro-processing, livestock and poultry, aquaculture, furniture and fixtures, transport equipment, mining, hotels and restaurants, medical tourism, construction, and shipbuilding.

The PowerPoint slides were convincing: in the last few years the numbers indeed were improving. Investments were breaching the one-billion-dollar mark, tourist arrivals were growing at double-digit rates and foreign currency reserves kept posting record highs, the peso has been gaining strength, and the national government deficit has been improving significantly from more than 4 percent of GDP to about 2 percent this year.

Then came supertyphoons Milenyo, Paeng and Reming. Suddenly everything changed. Coming after Neda’s announcement the industry sector slowed down in the third quarter, Reming’s fury highlighted the possibility that the economy is probably losing steam and could no longer achieve the growth targets.

The statistics, specifically the monthly integrated survey of selected industries (Missi), had been showing these negative signs all along, yet government planners ignored them and regaled themselves with the other numbers that seemed to be doing well.

But Reming was a reality check, unmasking the vulnerability of such growth, forcing the government to accept the targets are a tall order. Sales of manufactures, said the usually optimistic Donald Dee, president of the Philippine Chamber of Commerce and Industry, are tepid even as we approach Christmas. And this is likely to worsen as the farms lost much buying power to the forces of nature.

The government just released the November inflation rate confirming the continuing slide of the consumer price index. That’s nice, except that it confirms Donald Dee’s observation about weak sales in the run-up to Christmas. Besides, electricity, gas and water, the consumer price index on most items, especially food, beverages, and tobacco; clothing; services; and miscellaneous manufactures are sliding. It could mean people are not buying, either because they don’t have much money or they feel so uncertain they’d rather save for a rainy day.

We’re back to reality and we better be prepared for the worst. If talk about global warming is accurate, we could expect more crazy weather (e.g. increasing frequency of supertyphoons followed by withering dry spells) that could ruin the technocrats’ planning models. There’s probably no more Milenyo or Reming very soon, but we all know that an El Niño is already under way.

What does Philippine Atmospheric Geophysical and Astronomical Services Administration (Pagasa) say about this? “Based on the latest observations and international forecast models, intensification of the El Niño episode is expected during the next three months and will likely continue through April to June 2007.”

There you go. We are going from the supertyphoon to another dry spell. While that may not cost so much lives and limbs, it might hobble the economy further through low agricultural growth, and trigger another water crisis in Metro Manila as previous storms failed to fill the dams that store water for the metropolis. Are we prepared for this?

Global warming may have introduced a new source of uncertainty for the economy. Neda may have to revisit its plans and programs to see if it’s still attuned with the times.

The greater variability of weather suggests we may have to work harder to boost the manufacturing sector by lowering tariffs for their inputs and the cost of electricity. We may have to enhance economy-wide competitiveness by introducing more competition in shipping and port operations, telecommunications, and banking. We should strengthen outsourcing and cyberservices by restoring English as the medium of instruction and beefing up general education. We need to train more skilled workers in engineering and construction to meet rising demand for these workers here and abroad.

Neda periodically prepares the regional physical framework plan on which all programs and projects are based. The Neda staff must revise them to highlight danger zones and strengthen the framework for coordination in disaster management.

The government may have to reorient programs toward drought-resistant crops, the use of efficient irrigation systems (like drip irrigation) and the deployment of shallow tube wells in strategic agricultural zones. Over the medium and long term, the Department of Agriculture and the Department of Science and Technology will have to focus research to these.

Most of all, we need to get serious with our environmental programs, including reforestation, watershed protection and the preservation of water bodies. Simple lip service and a business-as-usual attitude will not do.

For almost a decade, policy analysts have talked of the need to use economic instruments (e.g. variable levies, charges and taxes) to provide incentives for responsible behavior among consumers. For instance, the National Water Resources Board should reflect the true cost of water by detailing expenses in water-source development and charging a variable fee based on water level at the Angat and La Mesa dams. If water is cheap on rainy days and gets expensive as the dry season wears on, people will be forced not to use potable water to irrigate their lawns and wash their cars.

At bottom, adjustment requires something of each one, the government especially. But the cost of inaction will be worse. (Photo credit: http://images.epilogue.net/users/dearden/Global_Warming.jpg)

3 comments:

Rizalist said...

Supertyphoons? Milenyo? Senyang? Haha I remember Dading in the 70s was a massive storm, far worse than anything since. But then again, our view of typhoons can be very subjective, as I think the ASEAN folks just found out.

But I really wonder if the earth is any more exceptional period now weatherwise, or if it is really human activity responsible. I don't think we've tracked the earth's condition long enough to tell really.

The warming phenomena is undoubted, but what is causing it is under great controversy and is a purely scientific question embroiled in purely global politics.

I've read work that says the flatulence of grazing herds and of termites in the ground is far, far greater than all human activity combined, as far as methane production is concerned.

So I view it as an impt scientific question that must be answered right or we are, uhmm, toast.

Dave Llorito said...

the recent crop of literature about global warming these days seem to lean more on human activity as the primary cause of global warming. im not a scientist so i took off from that assumption and speculated on its probable impact on the philippine economy and what we could do to help address the issue. yeah right, we could help solve it where we are.

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