Wednesday, February 28, 2007

Philippine mid-term elections: politicians should spare the economy

WILL the politicians, both from the opposition and the administration, please stop politicizing the country’s economy? Will they please stop using it as fodder for election propaganda? This is the only way we can sustain the modest growth we have achieved so far.

It’s funny that Malacañang keeps on harping about its supposed “economic performance,” citing the 5-percent to 6-percent growth rate achieved in the last three years, the gains in the stock market, the recovery of exports, among others, as part of the ruling party’s campaign spiels.

These are real gains, alright, but in truth Malacañang has little to do with it at all. A look at the national income accounts shows the country’s growth was largely driven by consumption financed by remittances, the rapid growth of cyberservices and the recovery in the export sector. The dynamics of these growth drivers have nothing to do with Palace occupants.

In the last three years, Malacañang has simply being doing whack-a-mole, suppressing scandal after scandal and crisis after political crisis that pop up here and there, while forgetting to enact the annual budget or repair a bridge or a road that farmers needed to bring their produce to the market.

If one looks at the national income accounts, one sees that the government expenditures in the last three years are flat or negative despite the fact that the government has been collecting higher VAT rates (12 percent) and higher corporate taxes (35 percent). In fact, the government has actually been reversing the policy reforms that the country achieved after the 1986 Edsa people power revolution. The most recent example is the increase in tariff rates for steel products from 3 percent to 7 percent—one that would surely penalize the construction sector.

So the real score is that we have achieved such modest growth rates despite having political leaders hobbling us. We could have achieved some more, probably on a par with our fast-growing neighbors, if only the government had been really attentive to the pulse of the economy.

But it’s also wrong for the opposition to denigrate the gains of the economy, no matter how modest by Chinese or Indian standards. The opposition, in a full page ad in one newspaper, said the country’s economic gains are “a mirage” and that all of them are “insignificant.” That’s unfair.

These growth rates are neither a mirage nor too insignificant to bother about, because they are the gains contributed by the country’s private business sector, the entrepreneurs, foreign investors and the OFWs themselves who sacrificed a lot just to send the dollars that the country badly needs. Everybody should recognize this fact. Are the 250,000 new jobs created by outsourcing a mirage? Is the $47-billion export generated by the private sector, about $30 billion of which came from electronics, insignificant?

For all the talk about China being the world’s factory, the fact remains that the Philippine manufacturing sector has been doing well at 4-percent to 5-percent growth rates in the last three years. Even economist Cielito Habito, former director general of Neda, recognizes this fact.

Somehow, the billions of dollars being sent home by overseas Filipinos have something to do with this. This money is converted into purchases of products produced by our factories in the same way that they keep the malls and the property sector booming. But we should credit the ingenuity of our factory managers and workers for holding their ground against competing products here and in the world markets.

Undeniably, joblessness is still high in the Philippines. It’s also true that the country’s economic growth is “narrow” as most critics are wont to say. Being driven largely by the services sector, the benefits so far have largely been felt by those in urban areas. But the Philippines has to start somewhere and the numbers these days say there are growth areas the country could work on to accelerate and broaden the economic base.

Asian tigers like Taiwan and South Korea took a decade or two of sustained 5-percent to 7-percent economic growth before they could address massive poverty. These days, China and India have been growing at 8 percent to 10 percent and yet, if we look beyond the surface, they still have a lot of things to do to touch the lives of their miserable masses.

Recent reports by international organizations, such as the International Labor Organization and the United Nations Development Program, continue to deplore jobless growth in these parts of the Asia-Pacific Region. So these countries must sustain that growth trajectory over the next decade before one sees a qualitative change in the lives of their impoverished sectors.

It’s the same tack that we should do, besides the usual equity-enhancing measures—and politicians should not reduce our chances for doing so by muddling the issues and denigrating our modest gains.

In international conferences, one often observes that while other countries discuss their gains and the “challenges” they need to overcome to usher in growth, Filipinos are beating their breasts—telling the whole world things are not changing, the Philippines is doomed forever and only the Second Coming of Christ could save the Filipino from damnation. No wonder other countries look down on us despite positive changes we’ve achieved. Such self-defeating negativity from what should have been more enlightened Filipinos, are aggravated by the sweeping remarks of political leaders from either side of the fence who interpret the data to either demolish the other or embellish one’s accomplishment.

From the structural point of view, what enabled the country from achieving such modest growth is the increasing share of the globalized sectors of the economy. The rough estimate seems to be that these sectors now account for more than 60 percent of the country’s GDP. That had somehow partially shielded the economy by the gyrations of Philippine politics. They are mostly the fruits of the painstaking policy reforms started by President Corazon Aquino after the 1986 Edsa revolution and were sustained by succeeding administrations. Specifically, the deregulation and infusion of more competition in transportation, storage and communications industries, as well as reforms in the country’s tariff system.

The task, therefore, for both the ruling coalition and the opposition is to strengthen these dynamics by sparing the economy from becoming collateral damage in their exchanges of political firebombs.

Certainly, debates about the economy are part of the political process. In presidential elections in the US, Republicans would rather look about America being a “house on the hill” while Democrats hammer on the “great American dream” and how to bring ordinary people there. Our politicians could do no less and leave hard-nosed economic analysis to independent parties that have no hidden agenda.

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