Monday, December 25, 2006

The way forward for the Philippines in 2007

WHAT is governance but the judicious use of power—the ability to achieve certain economic, social and political ends—and authority or legitimacy to use such power? And yet, if there’s one factor that’s really preventing the country’s economy from growing faster and creating more jobs, it’s this widening deficit in authority that’s buffeting this administration.

Certainly, we need to add to and improve infrastructure; we need more investments in human resources. We need a lot more to enhance the economy’s competitiveness. But on top of that we need to have a credible government and political leaders and institutions respected by the public and the investors. For most of the year, this country is hobbled by this problem. It seems we are the only country whose leaders are always being regarded with suspicion and contempt by the global community.

Consider SWS’s survey on net satisfaction rating. Since October 2004, GMA’s presidency has been suffering from a negative satisfaction rating. In simpler terms, the majority of the people are dissatisfied with her leadership in ways not seen since the Edsa Revolution. Presidents Corazon Aquino, Fidel Ramos, and Joseph Estrada had their own worst nightmares, but their satisfaction and trust ratings never dipped this low.

Survey numbers from Pulse Asia show that half of Filipinos simply do not trust the President.
They are critical of her on six major issues: criminality, political killings, workers’ pay, poverty, graft and corruption and inflation—the bread and butter issues of governance. When one fails to address these issues effectively, what is one’s to govern?

GMA’s problem is staying there for the sake of being able to finish her term. In this brave new world of globalization and information revolution, political power is diffusing to various political and economic players like corporations, interest groups, civil society organizations, and the Church. Hence, increasingly, political elites worldwide are finding the need to build political alliances with these various players to get things done one project at a time. GMA’s political isolation makes this hard. That explains why her programs and projects can’t seem to take off. Why, even Congress doesn’t pass the annual budget.

In her last State of the Nation Address, she announced huge budget expenditures for her “super regions” program, but until now, the lethargic bureaucracy hasn’t started moving. Her pet projects and legislative programs are stuck through the policymaking machinery, with allies taking pains to appear “independent” these days.

The year 2007 could mark her out as a lame-duck president, an administration with power sans authority. But if she still has energy to govern this country, she could probably recover by reaching out to various social and political groups.

This is important because 2007 is fraught with dangers for the economy. El Niño is a looming threat. As seen in the past three quarters, poor performance from the farm sector usually drags down the entire economy. The manufacturing sector, despite high expectations from electronics, has slowed down in the third quarter even as dollar remittances kept flowing. Not enough jobs are created despite the continuing growth of the outsourcing sector. And lately, inflation has started to manifest weaker demand, a probable indicator of rising lack of consumer confidence.

We can’t blame the people because in the last four quarters, the government did not show economic leadership. The administration simply tried to survive politically by hanging on to power at all cost. The economy went on “autopilot,” relying mainly on the initiatives of the private sector, overseas workers, and just everybody else who tried to live and survive.
The economy cannot go on like this in 2007. To achieve a higher growth level, the government will have to make the move. Reaching out to various social groups and forging alliances with them for a common growth agenda for 2007 is difficult but the government could probably initiate four major initiatives as confidence-building measures.

First—and the most strategic one—GMA should stop talking politics and truly focus on the economy. She should put an end to all political gambits that proved unpopular in 2006, including Charter change. Cha-cha has been a political lightning rod, attracting all sorts of criticisms from various groups. You take away Cha-cha, you stop talking politics, and you will have time to focus energies and resources on the economy.

Second, the immediate passage of the 2007 budget should be a priority. The passage of the budget would not only provide funds for major government programs and projects but also would signal the government’s seriousness about the economy. In 2006, the failure to pass the budget was a source of recriminations about how the government is (mis)managing the economy. People generally thought the failure to pass the budget was a deliberate move by the government to have the flexibility to squander money for elections.

Third, the government should put flesh and blood on the so-called super regions initiative. We really haven’t seen any tangible details of that plan since the President announced that initiative. The National Economic and Development Authority (Neda) and the Office of the President should come clean on this and start the ball rolling.

And fourth, the government should launch a major initiative on education. It can jumpstart the process by bringing together the House and the Senate to pass a law bringing back English as the medium of instruction in all levels of the educational system. It could also announce a streamlining of the school curriculum to give it more focus on the English language, science and mathematics. Such could probably involve certain policy reforms, including higher financial incentives for language, math and science teachers; teacher-training programs; and the opening up of education to foreign participation.

Countries like Malaysia, Indonesia, Thailand, and Singapore have been attracting a lot of world-class universities and there’s no reason why the Philippines can’t do the same to boost the country’s educational institutions. A serious student loan program is an investment in human resource. In this age of globalization and information technology, investment in human resources seems to be the fastest way to progress.

Four things, for a start. Christmas is over, let’s get to work.

Sunday, December 24, 2006

Is the Philippine economy hollowing out?

FORGET about gross domestic product growth rates. Forget about export statistics. Forget about improving fiscal balance. Instead, focus attention on the latest labor force survey. If we want to understand how we really fared in 2006, and what we could do in 2007 to make a difference, the labor force survey is the one that could tell us the real score. The rest of the statistics would be a mirage.

The October labor force survey (LFS) says that unemployment rate has improved a little from 7.4 percent in October last year to 7.3 percent in the same period this year. That 0.1-percentage point improvement is nothing to sneeze at since it meant there were 312,000 more people with jobs. Also, the underemployment rate has improved from 21.2 percent to 20.4 percent. In absolute terms there were more than 200,000 workers less satisfied in their jobs.

These seem to be interesting statistics, except that when we look at the bigger picture we can see that the improvement in the jobless rate is significantly influenced by the fact that there were fewer people joining the labor force. In October last year, the labor force participation rate was almost 65 percent; it’s 64 percent in October this year. This seems to indicate that a significant number of Filipinos opted not to work either because they don’t expect to find work or that they don’t have the qualifications to meet industry requirements. In other words, the bus ride felt a little bit comfortable simply because more people did not take the ride.

Certainly, the drop in underemployment suggests that many of those who got better jobs this year are those who are already working. They simply moved to whatever better jobs the economy has created, thus crowding out fresh entrants and those who are less skilled.

This explains why there were only 310,000 incremental jobs created within the survey period, not even enough to soak up 312,000 more people who joined the labor force. The name of the game in the labor market these days is “qualification” and those who got the incremental jobs necessarily are those who are with skills and practical experience.

The labor force survey also showed certain distressing signals that government planners should look at carefully. For instance, in October this year, there were 64,000 less entrepreneurs while unpaid workers rose by an additional 167,000. That means some of those who were listed as “employed” when the National Statistics Office knocked on peoples’ doors were working—without pay.

In the last three quarters, agriculture and the manufacturing sectors were doing quite well. But it’s a surprise that these sectors have declining employment numbers. The farms had lost 7,000 jobs while the factories had 31,000 less jobs. About 79,000 artisans (trades and related jobs) lost their businesses while 20,000 operators of plants and machines, as well as 21,000 laborers, lost their jobs.

Is the Philippine economy hollowing out? These figures seem to suggest just that. Whatever incremental jobs were created within the survey period came largely from the services sector (a total of 305,000 jobs). Major contributors of incremental jobs are real estate (79,000 jobs), private households (67,000), government agencies, including public administration and defense (48,000), hotels and restaurants (42,000), and financial intermediation (35,000). What this trend suggests is that the jobs created are concentrated in the cities—specifically Metro Manila, Cebu, Davao and other major secondary urban areas—while the countryside is losing jobs! And these jobs are largely grabbed by the more educated or skilled people.

These trends should worry us all because we are seeing the worsening polarization of incomes, economic opportunities and wealth in the country. We could see this polarization at various levels.

First, the cities are economically expanding while the countryside is stagnating. With this trend we can only foresee that premature rural-urban migration will worsen, thus stretching urban services to the limits. Do we wonder why we can’t seem to address urban congestion?

Second, economic expansion is felt by the relatively well-off. Notice how the middle-class is largely grabbing whatever quality jobs were created during the survey period. This means that while government economic planners were yakking about the benefits of outsourcing and the booming electronics industry, the ranks of slum dwellers who can’t partake of the emerging economic bounty are swelling. Do we wonder why the numbers of those who say they experienced hunger are rising?

What’s happening right now is the result of government neglect in terms of providing crucial economic infrastructure. In an effort to produce better statistics on “fiscal balance,” the government deliberately withheld investments on roads, bridges and ports, among others. And yet, these government bureaucrats actually hired tens of thousands more of people despite the fact that government agencies were not implementing any major economic projects.

Naturally, the country’s farmers and factories suffered. Because of problems like lack of decent infrastructure, rising production costs forced them to lay off workers. Owner-cultivators also employed fewer farm hands. One is left to imagine how poverty in the countryside these days must be worsening.

The solution? This administration should start getting those social and economic infrastructure projects moving, as promised, in the last State of the Nation Address. There are so many other things to do but starting right there would be a big step in the right direction.

Monday, December 18, 2006

Towards a green Christmas

GLOBAL warming is here with us, and it’s useless to debate the extent to which it’s going to change our lives in the near or distant future. The important thing is to change the ways we celebrate Christmas and the New Year.

Since “Christianity” started taking root in these Fiesta Islands, we have been celebrating Christmas and the New Year in successive orgies of bacchanalian excess that would put the Romans to shame. Millions of Filipinos ate, drank and were so merry many of them died of hypertension, cholesterol overload, and cardiac arrest from nights of stressful alcohol-laden bliss. And many got literally blown off to bits by firecrackers so huge they literally look like those improvised explosive devices used by insurgents in Iraq.

From what is supposedly a solemn affair about the Savior who came as a humble child in the manger, we have transformed Christmas into a seasonal paganistic overkill.

No, we are not concerned with morality here. Different strokes for different folks. We are concerned more with the fact that, while we are destroying our own health through frenzied overfeeding, we are destroying the planet as well by hastening global warming.

Consider this: On the 25th and the December 31st, many among us are shooting hundreds of thousands of tons of firecrackers, thus sending huge volumes of sulfur and other air pollutants high up into the atmosphere. The smog lingers in the air for days after the festivities, as if we had just burned millions of hectares of our rainforest in wildfires.

After the smog clears, we can see clearly the gigantic piles of garbage in streets coming from the gift wrappers, nonbiodegradables like discarded water bottles, styrofoam packs, plastics, spoiled food, and other stinking refuse. Much of the waste ends up getting burned in the dumps, thus causing even more pollutants and carcinogens. The rest of the garbage in the streets are scattered by feral cats and stray dogs and these clog the sewer pipes, thus causing floods and the spread of leptospirosis when the rains come. The original sin, ours, of starting all this mindless bacchanalian feasting is not exactly the act of people who are supposed to be responsible stewards of God’s creation.

If we want to celebrate Christmas in a truly “Christian” way, therefore, we must learn to celebrate it in a truly “sustainable” way. We can do this by reducing our carbon footprints and there are a thousand and one ways.

For instance, we can reduce the volume of waste by giving gifts sans the usual wrappers. Those gift wrappers are superfluous. People who receive gifts usually tear the wrappers away and throw them into the trash bin. Ultimately, they end up in the dumps or in the piles of garbage in the streets where they are burned—again, emitting noxious chemicals.

So giving gifts without the wrappers is one surefire solution. That way we can also save money. The recipients will surely understand if we just explain the principle behind it. Come to think of it, the Magi actually didn’t wrap their gifts when they went to see Jesus at the manger.

In these days of the Internet, sending “virtual” gifts, e-cards, and e-mail is a perfectly accepted way to connect with our friends and loved ones. Electronic cards are free. That way, we don’t have to burn so much cash. In reality, enjoying Christmas with people who are dear to us is not really about the material things we send and receive. It may sound mushy but it’s a timeless truth: it’s all about the idea that our loved ones are thinking of us in this season of good cheer.
Yes, we should maximize the use of the Internet to connect with friends. With the advent of broadband, we don’t need to drive to a friend’s or relative’s house. We can always do teleconference or e-chat. Or send a text message. We could leave the car at home during the Simbang Gabi. No driving means less traffic congestion, less burning of fossil fuel, less emission of ozone-depleting substances.

Christmas is when people seem to get afflicted with a certain travel madness. They travel to and fro and circle and shop as if there is no tomorrow. As a result, the streets leading to the malls, shopping centers and restaurants are always congested. Clogged streets do not only fray the nerves, they also force drivers to burn lots of fossil fuel. Lessening travel demand certainly is sustainable. Nevertheless, if we couldn’t help it, we may have to plan our trips well. Carpooling is an option. Or we could use public transport. Or better still, we shop online.

And most of all, we should avoid shooting fireworks. There are certainly other creative ways to make noise than burning sulfur and other harmful chemicals that poison the air.

A “green Christmas” may sound like taking away the fun from Christmas. It surely does sound like that but it’s only a matter of redefining our perspective. Global warming—manifested increasingly each day in unpredictable weather and destructive droughts and storms and other “inconvenient truths”— is a real issue all must confront squarely. Who knows, by pursuing a green Christmas, we may yet bring back the true spirit of the season, the original idea about the Messiah who came upon the world to save us from ourselves.

Wednesday, December 13, 2006

Monster on the loose!

ON December 12, the National Statistics Office (NSO) released the latest numbers on merchandise exports, saying the Philippines sold more than US$39 billion of tangible products to the rest of the world from January to October, up 16 percent from the numbers in the same period last year.

That’s certainly good news because, when we look at the NSO report more closely, our export growth was broad-based. Electronics grew by more than double digits (11 percent), but so did other sectors like manufactures, copper cathodes, petroleum, woodcrafts and furniture, bananas, processed tropical fruits, tuna, iron agglomerates, gold and copper concentrates.
But who really has heard about that good news? Not many. And that’s because most people’s minds these days are focused on the commotions and scandalous behaviors at the House of Representatives as the gang of Speaker Jose de Venecia Jr. tried, but failed, to ram through Charter change through the constituent assembly. Not even the cries of Typhoon Reming victims in Bicol could drive them to pause and ponder how they are ruining the country’s growth prospects this year and the next. Now they are trying to revive the corpse once more through the Con-con.

Such antics at the House somehow mirror the current bifurcation of the Philippine society at its worst, a social chasm that has been hampering the country from economically moving faster. We seem to have a Janus-faced society that is so conflicted we can’t figure out which face to show, the nice or happy face or the monster riding roughshod on our hopes and dreams.

On one hand, we have in our midst the people—private business, entrepreneurs, office workers, farmers, civil society groups—who are just so sick and tired of dirty and brazen politics, and are hoping that somehow, their leaders would come to their senses and stop doing anything that would threaten the economy’s prospects. They represent the nice and happy faces of our society. These are the people who are aware of their surroundings and of the fact that the rest of the world is moving on headstrong toward progress. The people, therefore, are hoping that somehow, these “political leaders,” who act like spoiled brats and rotten teenagers, would mature and start working for the common good.

On the other hand, we have “political leaders” who are so disconnected from the pulse of the nation, so remote and isolated from the wishes and aspirations of the people that they actually don’t give a heck whether or not we are headed to perdition. For them, what seems to matter most is political survival and it matters not that the economy, meaning the living standards of the people, might be derailed. They are the monsters whose obsession for power is matched only by their brazenness.

In the last several quarters, the happy face of this country has actually tried to manifest in decent gross domestic product growth rates, rising exports, stable factory capacity and utilization, a “strong peso,” rising remittances and domestic demand, improving finances, exuberant stock markets, and enthusiastic call centers. Somehow, the monsters in our midst lied low to give us an improving reputation as hosts to outsourcing. Lately, there have even been encouraging talks about the Philippines becoming a “knowledge-processing” center in Asia-Pacific.

Now we know at this time that efforts of the people, the happy struggling faces of our society, are not enough to lift us all from poverty and pervasive joblessness unless the rulers do their share of the work. What has been doing well all along was largely the external sector, whose dynamism is beyond the country’s control and influence. We have come to realize that our current exports growth, rise of call centers and the billion-dollar remittances are not enough to lift us to the levels of development achieved by our neighbors.

Thus, the people, especially the private business sector, have been saying that it’s time now for the country’s ruling elite to rise up and do their mandated work and clear all the logjams that have been hampering economic growth: lack of absorptive capacity, red tape, inefficiency, incompetence and plain lack of vision.

But so isolated are these people from the wishes of the larger society that they heard the message wrong. Instead of seeing the improving numbers as a chance to ratchet up growth, they instead started embarking on another political misadventure through the Con-ass, a sinister project that would further infuriate and polarize the entire society.

Why are they so insensitive to the wishes of the people? Why are they so blind to the desires of the private sector for stability and continuity? Why are they so brazen to challenge the patience of the people?

After the House retreated from the Con-ass, the administration became isolated. But we fear that they have already done great damage to the economy and its near-term prospects.
The administration is so embarrassed about its humiliation in the Con-ass that it had to cancel the Asean summit to avoid Asean delegates seeing all the rambunctious and scandalous antics of politicians in the House of Representatives. That Malacañang had to blame a typhoon for the cancellation has made it all the more ridiculous.

But there is a huge price to pay for that: our image as an investment destination, and the competence of the country’s leadership. It would be bad enough that we lose our face, but it would be worse that the jobs are not going to be created for lack of investor confidence.
And the worst scenario is that, with an angered citizenry that has lost respect for the current political leadership, we might see yet again mammoth demonstrations, street confrontations, and utter chaos that, in the past, had given us an image of a nice, resilient people governed by insensitive politicians behaving like monstrous, rotten teenagers.

Monday, December 11, 2006

Read the people's lips: no short cuts!

NOW that Con-ass is dead, will the government please do the real business of governing?
In the last several years, the residents in Malacañang have been pretending to govern while putting out political fires. Now it has to do it for real because the stakes are high for the Philippine economy. We are approaching 2007 and that year might yet be a crossroad for us Filipinos.

In the last several months, international institutions have been saying positive things about the Philippines. For instance, the World Bank, traditionally conservative about our growth prospects, has predicted a better figure for the country’s gross national product. We just had our upgrade from Moody’s to stable. Revenue collections are improving. Tourism arrivals are improving. And investments, although loose change by Chinese standards, have started to breach a billion-dollar mark. And for sometime last month, the stock market was brimming with exuberance.

But lately, dangers signs are appearing in the horizon. Typhoons have ravaged the country’s agricultural production areas and the manufacturing sector—based on the third quarter economic performance—is slowing down. El Niño has started to rear its ugly head. And the inflation rate, normally a positive sign when it’s slow, has declined uncomfortably for too long, indicating a strong likelihood that people are not buying. December is normally a season of good cheer but we don’t seem to see retailers jumping up and down like monkeys. It seems like consumers, the main pillar of the Philippine economy, are holding on to their money.

Why? Political uncertainty related to Charter-change campaigns by the administration and its allies at the House of Representatives should really be the reason. When Speaker Jose de Venecia Jr. tried to railroad Charter change through the constitutional assembly in the wake of the Supreme Court rejection of the “people’s initiative” months ago, many people (many of whom stayed apolitical in the last several years) were jolted out of their political slumber. Had de Venecia and his gang pushed through with their antics despite popular opposition, they could have had another “revolution” in our midst, an event that would have killed whatever respect the world has for us Filipinos.

From the start, JDV and his manipulators in Malacañang should have realized that Con-ass didn’t really have an iota of a chance to succeed. For one, its acronym really stinks, something that sounds like a brazen con game straight out of some despicable trapo’s ass. Second, the haste with which they rammed it through the House of Representatives tells us they are up to something that we ordinary people don’t know. Or maybe they are really desperate to push a certain agenda, making them even more dangerous.

Of course, we all know that Malacañang dwellers dread the coming May election as it will produce a Senate that is totally dominated by the opposition. With an opposition-dominated Senate, it would be much easier for the many balimbing in the House of Representatives to shift allegiance away from the ruling party as they, more than ever, have the greater chance of getting a conviction for President Arroyo in the Senate. So Joe de Venecia huffed and puffed but he had to back off when they saw the dark clouds of public opinion in the horizon brewing dangerously like a supertyphoon about to sweep off Malacañang from it foundations.
It’s a good thing that JDV and Malacañang backed off from Con-ass; but there are indications it’s just a tactical retreat, and it would help us right if they would start burying it in the dumps of history.

Certainly, people are sick and tired of the convenient and short-sighted shortcuts that characterized Philippine politics in the last decade. After all the mess that came in the wake of the extra-constitutional means with which former President Joseph Estrada was removed from power, the people—including the Church—have certainly matured politically by ignoring attempts in the past to topple Mrs. Arroyo’s government through yet another extra-constitutional means. And certainly it maddens them that Mrs. Arroyo herself would seem to resort to the same sleazy shortcuts just to push for a Con-ass amid popular resentment.

Read the people’s lips: no short-cuts!

If JDV and GMA want to change the Constitution badly, they should do so using the right and constitutionally mandated procedures. Certainly, there are archaic provisions in the Constitution that need to be updated (like allowing more competition in utilities, media, banking, shipping, port operations, retail, among others, we would effectively deal with monopolies), but we have to do it the right way, through open debates, in a truly transparent and democratic way. We reform while ensuring that the beneficiaries of such changes are the people and not the current crop of politicians who are a party to the current state of paralysis and incompetence.

Certainly, JDV’s and GMA’s defeat should be painful. But they can redeem themselves by refocusing their energies on the economy. As we have pointed out earlier, we are at the crossroads; what they do in the next two or three years would define much how our economy would perform and where this country will go. If they would do further stupid political mistakes in the next few months (like reviving Con-ass in other forms), the creeping political uncertainty would gain momentum, thus derailing the economy in 2007 and beyond. But if it is stopped and officials started to exercise prudence, we might yet come out of 2006 and 2007 with better economic numbers.

As they lick their political wounds, GMA, JDV and their minions could do this country some good if they work together to focus their minds, energies, and resources on the Philippine economy. We haven’t seen anything tangible since the President promised to spend billions for the “super-regions.” We have not seen anything tangible since the President held an investment summit with the local and foreign chambers of commerce and industry. We haven’t seen any gains in terms of mobilizing government resources to pursue infrastructure development. Now that all their political gambits were check-mated by the people at every corner, they should have more time to really look at the Philippine economy and do their jobs.

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:

Tuesday, December 05, 2006

Solving the jobs-skills mismatch puzzle

ASK human resource practitioners and they will swear the jobs are there but employers are having a difficult time finding the right kind of people. The problem, they say, is a mismatch between jobs offered and the skills provided by the country’s educational system, a weird sort of scarcity amid plenty that is being accentuated by the rapid growth of business-process outsourcing, and the globalization of the Philippine labor market.

But how could we bridge this widening chasm? First, we need to bridge our understanding of the jobs-skills mismatch and objective condition on the ground.

Many policymakers seem to assume that schools tend to produce ivory-tower intellectuals and artists who will starve because they are not what employers need. The schools, they say, should encourage “employable skills”—short hand for worker bees trained in vocational and technical (VocTech) education; warm bodies who fiddle, tinker and produce concrete saleable products and not those woozy-headed thinkers who agonize over the meaning of life. The schools, they say, should cut emphasis on liberal education and focus on “hard” physical sciences and VocTech.

These views stem from our martial- law hangover when Ferdinand Marcos imposed the National College Entrance Examination to screen out and channel more people into one- or two-year courses. But do these old notions about the skills-jobs mismatch still stand?

The answer is no. BusinessMirror’s job ads monitoring (JAM) project, now on its fifth month, shows that the world is no longer what it used to be. This much is obvious in the October JAM report, where employers in three major national newspapers and three major online jobsites posted almost 35,000 advertisements for jobs.

The top 20 advertisers, from the highest to the lowest, are: cyberservices; construction and engineering; human resource/manpower firms; manufacturing; wholesale and retail; hotels, restaurants and resorts; financial intermediation; transportation, storage and communication; health and social work; education; personal, community and social services; real estate and renting; business consulting; mining and quarrying; advertising and promotions; extraterritorial bodies; and agriculture, fishery and forestry.

And what sort of skills do they require? Again, in descending order: professional and technical, clerical, production and related workers, administrative and managerial, sales workers, and service workers.

These numbers indicate that employers require skilled people, most of them highly schooled. Data seem to suggest that employers need both those who tinker and produce concrete stuff and those who think and produce intangible knowledge-rich products and services.
The recent study by the Personnel Management Association of the Philippines (PMAP) supports this paper’s JAM findings. In a study that covered fast-growing industries like pharmaceuticals, banking, consumer goods, hotels and restaurants, semiconductor, information technology, telecommunications, retail, and call centers, employers say they want people who have good communications skills, with strong analytical and conceptual skills, and have initiative.

These preferred basic competencies perfectly sound like those “soft” skills from a good liberal education. Certainly, the country needs more programmers, engineers, architects, physicists, welders and pipe fitters, but the workplace these days demands no less than a good liberal or general education for these people of the hard sciences to make a difference.

This new information on skills mismatch suggests that universities don’t have to junk their liberal and social sciences. In fact, the real issue seems to be how to strengthen it to compliment the hard sciences and the VocTech.

Gone are the days when all that engineers or chemists had to do was dazzle people with designs, numbers and formulas. Now they need to have leadership and social sophistication as well. They need to have self-confidence, assertiveness, flexibility and maturity; a global perspective and awareness of their social milieu, in contrast to the old notion of technical guys as introverted, remote number crunchers.

So, do our schools have what it takes to produce the workers demanded by the new, transformed and globalized workplaces? The evidence so far is mixed. While we have several centers of excellence providing quality education, the overall verdict seems to say the schools don’t produce enough “employable” graduates. Not even the VocTech school, according to PMAP, as their graduates are not doing good in the labor market either despite the rising demand for workers here and abroad. In the last six months, 80 percent of the job advertisements in construction and engineering were for overseas placements. Yet, according to the POEA, the Philippines could only fill half the job orders each year, a proof that those VocTech schools are not providing the required skills either.

What we see here therefore is not just a problem of mismatch, but a complete disconnect of the educational system with the dynamics of the labor market.

Solutions? Experts in the last tripartite human resource summit hosted by PMAP suggested greater industry-academe tie-up, especially in curriculum development. That’s fine, but it may not be enough to bring this country out of its low-growth equilibrium. If we want world-class education that could make this country the dragon economy we always dreamt of, we need a strategic look at how we fund the education of our children; and to look at education as an investment on the country’s future.

We are not talking of giving more money to the Commission on Higher Education. The idea is to set up a huge fund for a student loan program similar to those in the United States and Australia. Australians, for instance, have the so-called Higher Education Contribution System (HECS), lately renamed HELP or Higher Education Loan Program, where students borrow money from the government to be repaid once they are gainfully employed.

They could use such money to enroll in whatever school they want. To ensure that schools provide quality services—and weed out diploma mills—independent bodies should develop and provide benchmark information to the public, like a school ranking index to denote quality, to guide students’ decisions. This information system will pressure schools to innovate and improve as the annual ranking or index would penalize lousy providers by not enrolling in their schools.

Sometimes, policymakers wonder why it’s so easy for the best and brightest to leave for foreign shores. Economics certainly is the reason. But it’s also because many of them feel “the system” doesn’t care enough to invest in their future. A student loan program could meet this problem. And bridge the gap between the rich and the poor that, over history, has been causing their deep social fissures and hampering our efforts toward progress.

Monday, November 27, 2006

The clue is in Leyte

WE have found some vital answers to the constant dilemma over the country’s poor educational system and they’re not in the glitzy, expensive, air-conditioned rooms of exclusive schools here in Metro Manila and other urban areas. It’s in the remote town of Tomas Oppus in Southern Leyte where visitors have to travel hours of unpaved roads just to get to Rizal National High School that recently topped the National Achievement Test for Freshmen Students.

Based on the story of this paper’s reporter Rommer Balaba, Rizal National High School (RNHS), being a public school, has nothing to show in terms of fancy gadgets and technology. But its teachers, parents and community leaders have the will and concern to ensure that students get to school and are taught properly despite the limited resources they have.

Asked about the reasons for the school’s success, Violeta Merin-Alocilja, Leyte’s division superintendent, had a short, self-explanatory answer: “Stakeholder participation, which includes the barangay leaders, parents, and local government executives, coupled with teacher dedication. There is a strong linkage between the school and the community. Parents, in particular, realized they have to give support either technically or financially so that teachers can focus on teaching.”

Now that—“stakeholder participation”—is really nothing. We often hear this word being mouthed by do-gooders and people who dream for change. The only difference is that people in Leyte took it seriously and voila, they got the high scores in areas such as English, mathematics, science, Filipino and social studies. It helped that the Asian Development Bank (ADB) provided soft loans in terms of teacher’s training, textbooks and new learning interventions. But that simply proves the point that given a little more resources and a lot of innovative community involvement, it’s possible for any school in the Philippines to raise its quality of education. There must be a way for the Department of Education to distill the lessons from this social experiment and upscale the efforts to the larger educational system so we could achieve drastic improvements in the quality of education in the Philippines.

We say we need drastic improvements in the country’s educational system because the Philippine economy, nay the entire world, is changing fast. In the last three years, the Philippine economy has been growing quite decently at 5 percent to 6 percent and there are indications it might yet achieve 7 percent a few years from now, and yet unemployment rate in the country has remained high at more than 8 percent. Why?

The usual reason is about “jobless growth” or the inability of the economy to generate enough jobs for the new entrants to the labor force, despite expansion in economic activities. Others say we are producing overqualified college-degree holders when all the economy needs is an army of skilled labor trained from vocational and technical schools.

Sounds valid enough but recent trends in the economy tend to show that these assumptions are no longer valid. Human-resource practitioners these days swear that jobs, whether abroad or within the country’s borders, are being created fast but employers are finding a hard time finding the people “with the right package.”

Main drivers of growth (like electronics and cyber services) these days require more flexible-knowledge workers that are not being provided by the country’s school system in greater numbers despite the rising number of students entering and leaving the school system. It’s not only that we are running short of skilled welders and pipe fitters; we are also running short of call-center agents, accountants, mining engineers, doctors, nurses, teachers, information-technology professionals, among many skills that require four or five-year college degrees or training.

The country will increasingly feel this problem as the Philippine economy goes up the value chain toward the “five-star outsourcing,” which includes analytics, market research, valuation research, investment research, online teaching, patent filing and media content supply.

And why this new trend? It’s because globalization has significantly transformed the workplace. Employers these days are increasingly dealing with global clients in a business environment that is changing fast and has become so diverse. Customers, most of them well-informed, are demanding. Organizational structures are flat, meaning that employees are expected to engage or get involved in decision making as corporate organizations compete and innovate.
That is why—according to the Personnel Management Association of the Philippines (PMAP)—the standards by which employers make hiring decisions have increased significantly. At the very least, they need three core competencies including excellent and written English, analytical and conceptual thinking, and initiative.

Employers, according to PMAP, need people who can write and speak excellent English with confidence, employees who can make presentations, and can understand foreign accents. They need people who can break down problems systematically, process large amounts of information, see consequences and implications, connect the dots, and make logical conclusions. In a highly competitive and fast-changing world, they need staff who persist in problem solving—people who do more than what are expected of them, and address problems before they are asked to.

In short, employers these days increasingly need dynamic-knowledge workers which the country’s school system is not providing in adequate numbers. For long, this country has suffered underinvestment in education. That’s the reason why we can’t seem to address unemployment amid economic expansion.

It is within this context that the Sogod experiment in Leyte is very important. Certainly, we need more schools with sophisticated facilities and highly trained teachers. But that takes a lot of resources and time. But we could still fast track the upgrading of the country’s educational system by learning what the people of Southern Leyte have done and take them to heart the way they did.

Thursday, November 23, 2006

Here's to women

Let us treat men and women well; treat them as if they were real. Perhaps they are.—Ralph Waldo Emerson

THE Philippines is probably the only country in the world where men call their women “commanders.” We thought all along that this is just a ruse by husbands to get into the kulambo after coming home reeking of booze until the World Economic Forum (WEF) released its gender gap report on Wednesday saying the Philippines ranks high—the only developing country—with those countries who give power and equality to women. And it’s a distinct honor for a country that has always been ranked lower in other measurements related to “competitiveness,” “economic freedom,” and “ease to do business” by several international institutions.

Besides the Philippines (ranked No. 6), countries in the top 10 include Sweden, Norway, Finland, Iceland, Germany, New Zealand, Denmark, United Kingdom and Ireland, in that order. These countries are on the honor roll for closing the gender gap between the sexes in four areas—namely, economic participation and opportunity (the outcomes on salaries, participation levels and access to high-skilled employment), educational attainment (access to basic and higher level education), political empowerment (representation in decision-making structures), and health and survival (life expectancy and sex ratio).

In short, while the Philippines is not as rich as these Nordic and European countries, our country has come a long way in terms of economic, political, educational and health opportunities to both men and women. In that aspect of life, the Philippines has come of age.

It used to be that parents would only send their boys to schools and the girls to the marriage altar. Not anymore. In fact, there seems to be more girls than boys in high-school and college campuses. An initial assessment of the country’s chances for attaining the Millennium Development Goals (MDG) by 2015 has shown that it is in gender equality in school where the Philippines has excelled, even before reckoning time. Moreover, women are now represented in all levels of government and layers of the corporate world.

At the same time, women live longer than men these days!

WEF’s Gender Gap Index report, therefore, is a fitting tribute to Filipino women, who, for a long time, have been carrying the heavier burdens of saving this country from economic damnation.
Now, to say they are carrying the “heavier” load would probably make the Filipino machos in our midst shudder. But statistics do support this assertion. If one looks at our economic statistics more closely, one would realize that more than 60 percent of the country’s gross domestic product is accounted for by the “globalized” sector of the Philippine economy.

We are talking here of the export sector (the bulk of which is electronics), outsourcing and overseas employment that have been propping up consumption. Many of the warm bodies in these economic sectors are women.

In the last decade, the Philippines has been sending more and more skilled professionals, which account for the double-digit growth rates in remittances. More than 60 percent of these newly deployed overseas workers are women essentially because developed countries need an ever-increasing number of nurses, caregivers and therapists (careers still dominated by women) to care for their graying population.

If one looks closely at the country’s national income accounts, one could see that “personal consumption expenditure” accounts for more than 70 percent of the country’s GDP or the value of goods and services produced, traded and paid for within the country’s borders.
Inasmuch as the Philippine overseas employment has been “feminized” it’s easy to assume that women have significantly helped in sustaining the jobs in factories, offices and shopping malls.
Indeed, the authors of WEF’s gender gap report did not write the report out of sheer sentimentalism. They prepared it with real economic sense in mind.

Said Laura Tyson, dean of the London Business School and one of the principal authors of the report: “Our work shows a strong correlation between GDP per capita and the gender gap scores. While this does not imply causality, the possible theoretical underpinnings of this link are quite simple: countries that do not fully capitalize effectively on one-half of their human resources run the risk of undermining their competitive potential. We hope to highlight the economic incentive behind empowering women in addition to promoting equality as a basic human right.”

It’s one facet of our economic development that the Philippines needs to nurture. And it’s not only because we love our mothers, wives, daughters and sisters, but also because it makes so much economic sense for all men and women to do so.

And certainly, despite the plaudits given us by WEF, we need to do more to address the remaining gender gaps especially in issues like domestic violence and rape, among others.
The past few years we have made great strides in legislating better protection for women—against sexual harassment in the workplace, against domestic violence, and against discriminatory provisions in civil law.

Yet by the very nature of our economic strategy of encouraging the wholesale export of workers, we still have to mainstream protective measures for Filipino migrant women. Trafficking in women, especially in minors, becomes easy because of weak enforcement despite tougher laws against trafficking per se and against passport falsification. Each day hundreds of minors are lured by syndicates to nonexistent jobs in the Middle East and Southeast Asia, especially, given falsified passports to hide their true age, and then shipped off to brothels—from where, often, the only way to freedom is a perilous escape. No wonder they come back with broken bones, and worse, broken spirits, if not in boxes.

Unless we can address fully these outstanding issues, we cannot completely bring out the champagne over the WEF report. Yes, we’ve joined the ranks of First-World countries, but we keep dark secrets that must be purged decisively.

Monday, November 20, 2006

The Philippines needs a new economic story line

THE National Statistical Coordination Board (NSCB) and the National Economic and Development Authority (Neda) will announce the third-quarter performance of the Philippine economy on Wednesday, November 29. But don’t expect any surprises there. Romulo Neri, Neda’s secretary-general, is going to say that the Philippines has achieved a higher GDP growth rate—probably 5.8 percent—fueled by OFWs’ remittances, consumption, higher exports and good farm harvests.

It’s the same old story we have been hearing in the last several quarters that will not have any bearing whether or not there would be less jobless people in the streets. We need a fresh story line to convince us that we are gaining real grounds instead of the illusory 5 percent to 6 percent growth-rate band that has yet to curb the rising unemployment numbers.

Lest we are misunderstood, we would like to stress here that we welcome the numbers showing the Philippine economy is indeed moving forward. The 6.5-percent GDP growth rate in the first quarter of the year is nothing to sneeze at. These are good numbers indicating that the Philippine economy may have left behind the era of boom and bust cycles that characterized the Philippine economy following the Edsa Revolution. In fact, there seems to be new growth drivers emerging in our midst including cyberservices, electronics, agribusiness, aquaculture, furniture, high-fashion garments, mining, shipbuilding, tourism, hotels and restaurants. Even the World Bank, traditionally not enthusiastic about the Philippines’ economic prospects, has recently issued a press statement saying the Philippines is on track to achieve 5.5-percent growth rate in 2006 and 5.7 percent in 2007despite the high probability of an external slowdown.

The World Bank here is saying that the Philippine economy has achieved certain resilience. And we have to thank overseas workers for that, as well as the entrepreneurs who persevered despite the continuing political turmoil and deteriorating infrastructure.

While Malacañang was busy putting out political fires, OFWs and business people tried all their best to move on. That’s the source of the country’s economic strength these days.
But we call these encouraging economic numbers “illusory” because they continue to signal several points of vulnerability. For one, we still owe much of these nice economic numbers to God, or sheer luck. In the last several years, the weather has been generally generous to the farm sector. That’s one big reason why the agricultural sector has been able to grow at 4 percent to 5 percent. Exports have been buoyant but this trend owes much to the rising global demand for electronics. New toys and gadgets these days (e.g. smart cars, third- or fourth-generation cellular phones, high-tech consumer durables) need higher and better electronic parts and we are benefiting from these new trends simply because we have lots of electronics and semiconductor firms within our borders, many of which have been here for more than 20 years.

And it’s illusory simply because these numbers have yet to make a dent on joblessness as shown by the latest labor force survey. The National Statistics Office (NSO) says that the country’s labor force grew by 2.6 percent, yet new jobs grew only by 2.3 percent.

Underemployment rose to almost 23.5 percent in July this year from 20.5 percent a year ago. In the second quarter, the Philippine agricultural sector grew by 6.7 percent, yet the labor force survey says the sector has lost 149,000 jobs. Yes, even agriculture is suffering from a “jobless growth”! Is it because of greater mechanization? That is not borne out by statistics either.
If we want to be certain about our growth and development prospects, if we want these numbers to translate to jobs for warm bodies, we need to hear about a real fresh story line. That story line is about investments becoming the major source of economic growth, about the policy measures and initiatives that could spur the Philippine economy toward a 7-percent to 8-percent growth. Experts say that’s the only growth level where we could start feeling that life has gone for the better.

The investment numbers so far—US$1.36 billion in the first eight months of the year—seem to be encouraging but are nowhere near the scale with which we see the massive building up of factories and shops that will hire thousands of people off the streets. And that’s only possible if the government could move faster in upgrading the country’s infrastructure. In pursuit of “fiscal consolidation” the government has totally neglected infrastructure development such that the Philippines now has the lousiest stock of infrastructure in the Asia-Pacific Region. In her last State of the Nation Address, President Arroyo announced a massive infrastructure program to address this matter—but we have yet to see things moving.

Besides infrastructure development, the government—with the help of the private sector—should really do something fast about the deteriorating educational system. We are not only talking about graduates who can speak good English. We are talking about a serious upgrade of our education and training in science and technology. And soon. We are currently experiencing jobless growth and deteriorating underemployment and that’s because economic growth these days is largely technology-driven. If we don’t plug this gap, we could never stop joblessness from deteriorating.

To repeat, we need a new story line. That should be less about remittances propping up consumption, but more about investments in factories and shops that create real jobs and better lives for many Filipinos.

Wednesday, November 08, 2006

On a journey down under

Ive been on the road here in Australia so i really havent had the time to update this blog until now. i didnt bring any laptop with me thinking that the hotels would provide free internet. late last year, i was in the US and the hotels provided free internet access. big mistake! in sydney, for instance, internet rates run as high as 5 australian dollars in 30 minutes. the cheapest i got was 5 AUD in an hour. that's too expensive for me. i had this chance to update because the Australian National University economics department provided me free internet. got to go!

Wednesday, November 01, 2006

SWS's self rated poverty surveys and the South Beach Diet

There are lies, damned lies, and statistics (Benjamin Disraeli).

Is it possible for poverty incidence to decline yet hunger incidence to rise? Sounds crazy but, yes its possible, says the Social Weather Stations (SWS) in it’s
latest survey result.

“The record high 16.9% of families experiencing hunger at least once in the past
three months was reached again in September 2006, according to the new SWS
survey. This amounts to 2.9 million households experiencing hunger out of a
projected base of 17.4 million households in the country.

“The latest poll, conducted from September 24 to October 2, also found 51% reporting themselves as Mahirap or Poor, compared to 59% in the previous quarter.”

If you are getting rich, would you say you experienced hunger? Probably not, unless you were on a South Beach diet. So SWS is telling us to not worry about experiencing hunger because we are probably getting rich. Funny.

SWS’s explanation for this contradictory result is even funnier. In its press release, SWS said the reason lies in the poverty threshold, or the amount of money needed for families escape poverty. SWS claims that over time Filipinos poverty threshold has been steady or even declining.

“The Median Self-Rated Poverty threshold, or the median monthly budget in
peso-terms that poor households say they need to escape poverty, went down in
Metro Manila, from P15,000 in June 2006 to P10,000 in September 2006, and in
Mindanao, from P6,000 to P5,000. It stayed at P6,000 in the Visayas and went up
in Balance of Luzon, from P5,000 to P6,000.”

Thus, it’s conclusion?

“Such money-value thresholds were already attained some years ago, even though
the cost of living increased greatly every year. Since the money-cost of living
is actually rising, a declining or unchanging poverty threshold means that
households are lowering their living standards, or belt-tightening.”

Cute, but is it logical? If you are force to do belt-tightening, would you say your economic standing is improving? I don’t think so.

If your financial requirement to escape poverty is the same or declining over the years (it certainly is declining due to inflation), does it mean you are belt-tightening? Not necessarily. It’s possible that your incomes, the basis for which you say you are no longer poor, is increasing. It’s possible that some members of the family got a job, hence the lower financial requirement.

SWS say the declining poverty threshold says people are “lowering their standards.” Probably. But would a people “lowering their standards” and economic expectations likely to say they are no longer poor? I don’t think so.

Based on SWS’s own historical data, it appears hunger has been on the decline reaching as low as close to 5 percent. But in the same period, the self-rated poverty threshold has been sizzling high at about 10,000 pesos. During the same period, SWS’s self-rated poverty was also on the downtrend. Using SWS’s explanation, how could a people say they are less and less suffering from hunger and poverty when their financial requirements to escape poverty are rising?

Something must be wrong somewhere. Let’s take those self-rated poverty surveys with a grain of salt!

Monday, October 30, 2006

Fiscal perks: giving away the nation's birth right!

NOW that the Board of Investments (BOI) and the Bureau of Internal Revenue (BIR) have admitted that they were giving tax holidays to every Tom, Dick and Harry without asking why, it’s high time for Congress to take over and launch a thorough investigation on the matter.

Right now, Congress is trying to reform the country’s fiscal incentive system through the “fiscal rationalization” bill and it would help if they first get to the bottom of this issue. Congress should do it not just “in aid of legislation” but in pursuit of economic equity and social justice!

The other day, Trade Undersecretary Elmer Hernandez told our reporter Max de Leon that some companies are enjoying income tax holiday despite the fact that they are not eligible to get these perks. Each year, the country loses about P300 billion in forgone revenues—and part of this forgone amount goes to those who don’t deserve them because, as Hernandez admitted, many of those who availed themselves of the fiscal perks were not entitled to them.

Hernandez said the government lost billions because the BIR just allowed income tax holiday claims in their income tax returns even without proof from the BOI that the claimants were really eligible for the perks. He seems to be telling us that it’s just a simple, honest mistake, or one caused by sheer inability of state agencies to get their act together or streamline their systems owing to the great burden of their work.

We don’t think so. We believe a large part of such neglect grows out of corruption that has been plaguing the country’s fiscal-incentive system since the last several decades.

We don’t think bureaucrats from the BOI and the BIR are people who are naïve enough to allow these shenanigans to get through under their noses unless some people deep within these bureaucracies are benefiting financially from it.

The questions right now are the following: What are those companies that stole from the country’s coffers? Who in the BIR approved their ITH claims? How much money did the country lose to what companies since the President Aquino Executive Order 226? And why is it that BOI doesn’t seem to have any idea about how the country’s incentives system is being implemented? How about the Peza’s incentive system? These are questions that boggle our mind.

This blatant abuse of the fiscal incentives system is almost criminal. For years, the country, nay the Filipino people, have been suffering from poverty and lack of economic opportunities for the simple reason that the State could not provide good economic and social infrastructure. Bureaucrats have been telling us ordinary mortals that the government needs to collect more taxes “to finance development” and we were foolish enough to agree to a higher VAT rate on all the things we buy with our slave wages. Little did we know that while these bureaucrats were taking away food from the mouths of our children, they gave away hundreds of billions of pesos worth of income tax holidays to favored friends and clients, including to ones not entitled to the fiscal perks in the first place.

God knows how much money bureaucrats from the BIR and the BOI and other “investments promotions agencies” are really giving away to favored companies. For all we know, they have been giving away the Filipino nation’s birthright, probably the main reason why we can’t seem to achieve economic takeoff despite a favorable external economic environment.

In the last 20 years, BOI, the Philippine Economic Zone Authority and several other “investments promotion agencies” have been giving away all sorts of perks—income tax holiday; duty-free importation of machines and equipment; exemption on duties and taxes on imported spare parts; exemption from wharfage dues and export tax, duty, imposts and fees; tax exemption on breeding stocks and genetic materials; tax credits; and additional deductions from taxable income—and we can’t seem to account for their impact on the Philippine economy and our future as a nation.

Agencies like the National Economic and Development Authority, the Department of Finance, and the Department of Trade and Industry cannot account for the real contribution of these perks to economic development because they may have been designed as a vehicle for rent-seeking behavior in the bureaucracy. Amid this flurry of perks are a tangle of almost 200 other laws and executive orders giving privileges to companies to claim more fiscal perks from the country’s coffers for several other economic activities ranging from the production of steels and ships and jewelries. This confusing snarls of laws and regulations and the apparent lack of transparency with which these agencies implement them suggest that abuses like double-dipping (claiming perks for the same projects from several laws and agencies) and the brazen act of collecting perks for investment projects that were not even registered with the BOI are prevalent.

Right now, the DTI does not want to release detailed information about the issue because “they are still completing their findings.” Congress should not wait for that report before acting on behalf of the Filipino people.

Imports figures say economy is on track

Imports rose more than ten percent in January-August this year, allaying fears of a possible slowdown late this year. It’s encouraging to note that purchases of capital equipment also rose significantly at more than 8 percent. It means our business people are buying machines and equipment for their factories and offices, an indicator of business confidence. But is it enough to reverse the decline in capital formation? That's the big question that could only be answered with the release of national income accounts in the third quarter.

Notable increases in capital imports could be noticed particularly in telecommunications equipment and electrical machines, as well as aircraft, ships and boats. This means the telecom boom in this country is continuing. The drive towards the 3G is one possible factor for this trend.

Friday, October 27, 2006

It's time to move on

Now that the Supreme Court has rejected Sigaw ng Bayan’s petition for Charter change through the “people’s initiative,” let’s bury that effort deep into Hades and move on with our lives.

If there’s one major political issue that’s dividing the country and has prevented the government from focusing its energies on the Philippine economy, that’s the Cha-cha. Let’s now consign it to the dustbin of history. Let’s work together as a nation to focus on the economy where we could really make a difference in the lives of ordinary people.

Actually, the Filipino people have moved on a long time ago and focused on what really matters most—their means of living. In the 10 quarters the Philippine economy has been growing within the 5-percent to 6-percent growth rate band despite all the handicaps of having to put up with corrupt leaders and perpetually squabbling politicians. And it’s quite a broad-based effort as the farms, factories and services all contributed significantly.

Our entrepreneurs, despite all the odds, moved heaven and earth to set up as well as attract investors in call centers, shared services, software developers and electronics if only to provide job opportunities and hopes to young college graduates.

Sick and tired of negativism and continuing tales of corruption in high places, many of our countrymen, many of them women, have left the country to slave it out as domestic helpers, nurses, engineers and service workers so they could send back dollars to their families and save the country from tearing apart. The government, the State and its leaders, have failed them but those OFWs can’t afford to fail their families so they just closed their eyes and out they went to endure loneliness and hard work in foreign shores.

Now, the entrepreneurs’, the farmers’ and OFWs’ money are lifting the economy out of its boom-bust cycles, creating demand for goods and services, giving life and more profits to factories, banks, hotels and restaurants, and shopping malls. Certainly, these gains are not enough to create a million jobs and soak up joblessness, but the people have done a lot of their own to kick-start an economic revolution that may yet lift the economy into a higher growth path if only the country’s political leaders would cooperate.

Yes, in the last 10 quarters, the economy—and we call it a people’s economy because it has been moving steadfastly on autopilot —grew amid declining capital expenditures from the government. Yes, the people—the entrepreneurs, including foreign investors; the working people in offices, farms and factories; and OFWs have moved on and tried hard to do business and create jobs while bureaucrats and politicians holding the levers of power are preoccupied with nothing but their day-to-day political survival.

And yes, the people sacrificed a lot by agreeing to a higher value-added tax if only the country’s finances could rise up beyond the shortsightedness of their political “leaders.”

Now, it’s high time that our political leaders, especially those in the ruling party, perform their own “sacrifice” by reining in their irrational political exuberance and focus their energies on the economy. Right now, the Philippine economy has reached a stage where shifting to a higher growth path requires a constructive role for the State, something that it has failed to do in the last three years.

In 2001, the country’s national government deficit was equivalent to 4.1 percent of the country’s gross domestic product (GDP). By this time of the year, the government’s national deficit is down to about 2 percent of the GDP, an indication that the people have done their share of moving this country forward.

We are not saying here that we should forget all about the sins of the malefactors in this government. Certainly we still want to have real closure to the Bolante fertilizer and other scams. We are saying that the rule of law should proceed to its due course while doing away with the unnecessary political distractions that could derail the country from its path to development. Surely, the political questions will linger. But we should let the May election next year and other legal procedures available to the opposition settle those political questions.

We are not blind to the arguments for economic reforms advocated by the proponents of Cha-cha. Indeed there is a need to remove the remaining obstacles to entrepreneurship and investments in this country. The main problem that stops us from supporting this effort is its political complications. When “economic reforms” are clouded by political opportunism, such a process of change loses credibility and therefore creates uncertainty that hampers economic expansion.

Some Cha-cha proponents say we need to dance the Cha-cha now or we lose the chance forever. We share their concern for stasis, but we believe that if the economic reforms being pushed through Cha-cha are really such good ideas, they are going to have a momentum of their own. No one could stop the flow of good ideas; they are going to gain flesh, blood and passion at the right time sans the baggage of partisan political considerations.

Stability, continuity and order. That’s what the country needs now.

Tuesday, October 24, 2006

That messy MISSI!

Four months into Christmas, the average capacity utilization of selected manufacturing enterprises remained high at 80.3 percent. That's good news, an indicator that the manufacturing sector has been pretty stable. But wait a minute! Why is it stable when it's supposed to move upwards? In the last ten quarters, the manufacturing sector has been growing at 4-5 percent. That means factories should be busier. But why is not reflected in the Monthly Survey of Selected Industries (Missi)? Something must be wrong somewhere.

Another question: why is it that for the last eight months, the volume of output has been declining? Of course, the computation of the national accounts is probably based on value, and the value of output has been growing quite well. But that's not an adequate explanation. Merchandize exports have been growing briskly in the last eight months. That means there's a real expansion in factory activities! But why is it not reflected in the Missi?

It's possible that the Missi is based on an old sampling structure that no longer reflect the new dynamics of the Philippine. Or its possible that private business organizations dont just tell the truth when the NSO people came.

Monday, October 23, 2006

Third World telecom, first world charges!

WE support the efforts of the Philippine government, specifically the National Telecommunication Commission (NTC), to make the country’s telecommunications industry competitive and efficient.

That policy environment is long overdue. Had we established an open and competitive policy environment for the telecommunications sector—nay, for the entire services sector— a decade or two ago, this country could have been growing as fast as India and China by now. We have missed a beat in the ongoing Information Revolution but it’s not yet too late to catch up. The government may not have the money to “upgrade” this country into the 21st century, but it could certainly do so by ensuring a competitive environment through several measures including disincentives to predatory practices and abuses. And why not go all the way by opening everything 100 percent to foreign direct investments?

The Philippine economy, and the entire Filipino nation for that matter, is better off in a more competitive policy environment for all economic sectors, not just telecommunications. Such a policy environment assures easy entry and exit, and therefore would allow more innovative players to emerge, thus offering better and cheaper value-added services that will benefit the entire economy. Open competition ensures the economic diversity that this country needs to grow and mature as well as withstand potential shocks from an increasingly globalizing world. Besides, open competition and greater economic diversity benefits all Filipinos in terms of choices. Right now, many Filipinos go abroad the moment they have the opportunity to do so because they feel powerless vis-à-vis factors like lack of career choices, lack of clear direction for the economy, and the utter inefficiencies of structures and institutions affecting their lives that could be linked to the country’s economically restrictive policies.

Right now, the Philippines is considered the “texting capital of the world.” But that’s an ironic reputation since the Philippines right now has among the highest or the most expensive telecommunications charges in the Asia-Pacific Region. According to the latest study by the Asian Institute of Management (AIM), overseas calls to the United States now cost US$0.90 for every three minutes—yes, that’s P45 pesos per three minutes—against $0.48 in India and $0.71 in Malaysia, our closest competitors in the outsourcing business. To call the US, the Canadians ($0.48 per 3 minutes), the Irish ($.59 per three minutes), and the British ($.65 per three minutes) are charged even lower rates than us Filipinos who are dirt poor! It’s these skyrocketing telecommunications charges that are forcing us to do the finger-breaking task of encoding letters into those tiny keypads one by one so we could send important messages to our loved ones.

In this country, however, companies are making money from the sale of cellular-phone units alone, the cheapest of which could cost nearly $200. In India, the typical cellular phone handset would cost as much as US$60. In other countries like the United States, telecom companies would even give away cellular phones for free if only to get subscription. Telecommunications companies would move heaven and earth just to please their clients.

This is now the 21st century, where wealth is created through innovation as well as the creation of knowledge. Access to information, specifically the Internet, is vital to progress and development. But what we have in this country right now is the deepening of the digital divide, where the rich who are few are getting the best of the digital world while the poor could not even think beyond three square meals a day. Again, that’s because of the uncompetitive situation in this industry. Right now, according to the AIM, Filipinos also bear the highest Internet charges in the region. On a monthly basis, Filipinos pay about US$17.05 for Internet services as against $8.74 a month for Indians, $8.42 a month for the Malaysians, $10 for the Chinese, $12.71 for Canadians, and $14.95 for Americans.

For a very poor country with just over a thousand dollars of per capita income, Filipinos are paying telecom and Internet charges way above what is being paid by citizens in the First World countries, who enjoy per capita incomes ranging from 10 thousand to 30 thousand dollars! And most of us don’t even enjoy the benefits of real broadband that most of these neighboring countries have. Why should Filipinos continue to put up with these, when they certainly deserve better?

Many of us still wonder why we can’t seem to catch up with our neighbors in the Asia-Pacific Region. The major reasons for this continuing underdevelopment lie with these realities. Not only do we have the most expensive electricity, we also have the most expensive telecommunications and Internet services, thus ranking us among the most expensive places to do business.

Right now, we still attract lots of investments in cyberservices. But that’s because skilled labor here is dirt cheap. So are the prices of real- estate. But once the supply of skilled professionals and technical people tightens, wages will rise. So will real-estate prices, especially now that occupancy rates in major urban centers are approaching 100 percent. That will push up business cost in the Philippines higher than places like India, Malaysia and Vietnam. That in turn will turn away cyberindustries from the Philippines. Our skilled professionals and technical people will probably follow them through global migration should that happen. That will be the tragedy of us all.

The choices therefore are clear: reform and be competitive—or perish.

Thursday, October 19, 2006

Philippine export numbers are looking good!

The Philippine merchandize exports rose 17 percent year-on-year in January to August this year. Now, that's real good news for the Philippine economy. The reasons? Electronics exports are doing well. So are other sectors including minerals, liquified petroleum gas, transmission applications, electrical machinery, bananas, basketwares, wiring sets, copper bars and rods, and crude coconut oil. That means the growth in exports are pretty broad-based.

It appears that the main sources of growth in the Philippines have been diversifying quite fast lately. Besides merchandize exports, services exports (outsourcing) and remittances from overseas workers are contributing significantly. Nice to know things are improving this side of the Pacific.

American national security experts don't know the difference between Sunni and Shiite!

"Know thy enemy, know thyself. A hundred battles fought a hundred battles won. That’s classic Sun Tzu. Everybody who is into the war business or intelligence knows that, right? American “national security experts” who are prosecuting the war on terror therefore should know the difference between Sunni and Shiite, right? Wrong. In fact, most of them don’t know a damn thing. In his article in Washington Post, Jeff Stein lamented:

And as I quickly explain to my subjects, I’m not looking for theological explanations, just the basics: Who’s on what side today, and what does each want?

But so far, most American officials I’ve interviewed don’t have a clue. That includes not just intelligence and law enforcement officials, but also members of Congress who have important roles overseeing our spy agencies. How can they do their jobs without knowing the basics?

That answers our questions why George Bush’s “democratization” project in the Middle East is such a mess. It’s probably the same group of people who fed George Bush the term "Islamo-fascism" that proved to be an embarrassment. Condoleeza Rice and Bush later had to discontinue using the term.

Truly, we are governed by idiots!,” cries

The new refurbished Blogger is cool!

Seems like I'm back actively blogging with blogger now that it has new cool features. I've started with Blogger November 29 last year. But as I got deeply into blogging, I realized its features are inferior compared to other platforms like Wordpress. So I strayed into Wordpress and Multiply from which I developed a new online social networks. With these new features, however, I guess I'll be back. Multiply of course is a totally different experience and I'll continue posting personal stuff there. Here in Blogger, I'll continue tackling the usual "serious" stuff I've been doing since last year.

For you guys in, thanks a lot!

Wednesday, October 18, 2006

Christmas is in the air!

Siberian winds are blowing; Christmas is in the air.

From dusk until dawn, the air is colder and pleasant, giving me nice dreamless sleep. The shopping malls start thinking about Christmas at the start of the BER months. My own trigger is the start of the colder nights in October which usually last until January.

Oh Christmas! I wonder why I look at it now with much anticipation. I usually don’t because Christmas to me has always been about traffic congestion, parties, and food binging—which makes me even fatter than I am right now. Journalists work until the 24th of December and are back on the road by the 26th so there’s really nothing to expect in terms of a longer break. We are like those much-abused ground pounders in the armed forces.

Christmas makes life more difficult for journalists. When interviewed, sources are usually polite, nice and impertinent. They will say “C’mon, its party time, ask me that later. You’re too serious!” Or they say “Oh, I’m scheduled to attend this dinner and that party. Could we reschedule the interview after Christmas?” There goes your story.

But I’m still excited. Maybe there’s more to this one. I don’t know but I hope. Maybe that’s Christmas: hope, dreams, and expectations that the next year will turn out good and nice.

RP's fundamentals are improving but fundamental problems linger

THE “fundamentals” are definitely right when we simply look at the Philippines’ external sector. That’s what the International Monetary Fund (IMF) wanted to see and it definitely got a beautiful picture. But those are not the only numbers out there that matter, and one needs to go deep into the “internal sector” to get the larger view of the forest. The IMF saw a few robust trees that it deemed enough to pronounce the health of the whole forest stable and nice.

Definitely it is pleasing to hear the IMF finally saying something positive about the Philippines after four decades that the country has been under its tutelage. For a long time, multilateral institutions including the World Bank, International Finance Corporation, and the Asian Development Bank, have had the habit of castigating Filipinos by announcing a lower growth forecast which time and again has been proven to be too conservative (Remember then Neda chief Solita Monsod’s quarrel with a visiting IMF team, where she said one cannot attain fiscal targets “on the backs of the Filipino people”—meaning, one can only obsess with numbers up to a point that does not hurt the ordinary folk so much). The IMF “experts” criticisms are usually couched in polite language yet the message sent is clear: that the Philippines is the same old laggard that it used to be in the last 20-30 years.

Not anymore. No one talks about the “boom-bust cycle” these days. The economy has moved up within the 5-6 percent, owing to the strength of the services sector and surprising recovery in both agriculture and industry. And recent trends in the external sector, the IMF’s favorite trees, are definitely encouraging.

From January to August this year, exports grew 17 percent, owing to the strength of electronics, garments, agricultural products, and minerals. Foreign direct investments have lately breached the billion-dollar mark. That’s loose change compared to China’s 60-billion dollar FDI figure but at least, the trend has been on the way up. The dollar flows from overseas workers remain in the double-digit rate. Dollar-wielding tourists have also been on the rise, numbering more than 1.4 million in the first half of the year. Dollar reserves have reached more than 4 months’ worth or imports. And national government debt has fallen to about 2 percent of the country’s gross domestic product, way down from 5.3 percent five years ago.

These are great indicators and we are happy about them but they hardly represent a totally, healthy and stable forest. In the last several years, capital formation—data that represent changes in the capital stock (buildings, machines, inventories) and how savings is used for investments—have been in the negative. Specifically, fixed capital measuring the value of construction, durable equipment, and breeding stocks and orchard has also been in the negative.

These figures simply mean that the 5-6 percent growth was achieved through the contributions of Filipino citizens through their personal consumption (no doubt significantly financed by remittances), and trade (imports and exports) in both merchandise and services (specifically cyberservices). Yes, that’s the glowing “external sector” but it doesn’t really say much about the general strength of the Philippine economy, especially if we view the Philippine’s performance within the context of the performance of the entire Asia-Pacific Region.

Several questions arise: first, why is it that despite the better growth figures, capital formation has not been rising? Does it mean the country’s entrepreneurs are not investing? That seems to be the conclusion one gets. It means entrepreneurs are still hesitant to buy machines, upgrade their factories, and build inventories on a scale that would show up in the country’s national income accounts. This looks like they don’t have long-term confidence in the economy.

And why not, when the government itself has not been investing in the country’s future? In 2006, the government has been operating on a reenacted budget, thus preventing it from raising expenditure on crucial economic and social infrastructure. Worse, whatever little public expenditure money the government possesses has been lying idle, either because of low absorptive capacity or plain bureaucratic inertia. President Arroyo announced a massive public expenditure program in the last State of the Nation Address for the “super regions” but there seems to have been less buzz about it since then. Government, it appears, has not really moved fast enough despite the urgency of the situation. Take note how the government has become silent on the matter after the announcement.

Or maybe it’s deliberate so the government could window-dress the country’s finances and mask its under-underachievement especially in tax. Why do we say this? It’s because in the last nine months, the government has failed to meet tax collection targets, and yet comes up with a deficit figure that’s 41 percent better than program. Somehow, in order to present a very good fiscal picture to the IMF and the credit-rating agencies, the government needs to tighten on spending. This tack seems to shoot two birds with one stone, i.e., present a good picture to the IMF et al, while giving officials generous elbow room for spending towards the end of the year. Of course, it is so tempting to suspect that the government is probably building a dam of people’s money so that it could release the floodgates just in time for the election season. Talk about “fiscal consolidation”!

These are the facts the IMF has failed to see. And we are concerned that the IMF praises could even serve as an incentive for the government to do less. Now, that’s the real tragedy because it even jeopardizes the long-term prospects of the economy.

Thursday, October 12, 2006

Mixed signals on fiscal incentives

We hope that President Gloria Macapagal Arroyo (GMA) was just talking in general terms to soothe the nerves of business people who attended workshop on foreign direct investment in the Philippines organized by the American Chamber of Commerce.

The president said that “our policy is to keep and improve the incentives the Philippines offers strategic foreign and domestic investors, especially exporters. The incentives need not be fiscal. The incentives you want are the competitiveness element: the workers being paid well enough in terms of affordable food; the technology, in other words, our continuing knowledge worker richness in our economy; the infrastructure; the power; and the reduction in the red tape. “

And on fiscal incentives she said: “let us assure you too that the Philippines will not become less competitive in the fiscal incentives we offer our foreign and domestic investors. I know some of your worries that's why I want to assure you that we will not support proposals that have that effect of reducing competitiveness.”

Anybody who follows the debate on the fiscal rationalization bill now being discussed in the Senate would find those statements confusing. On one hand, she was saying that competitiveness ultimately depends on a much broader range of factors like the state of infrastructure, overall policy environment, among others. This has been the argument by the economists who think it’s high time we junk the current fiscal incentives system that has been causing a lot of hemorrhage in the country’s revenue collection system. Each year, based on data from the Department of Finance, the country has been foregoing collection of at least P300 billion a significant part of which are probably redundant and unnecessary. Had the country been able to collect at least half of that, so the argument goes, we could have accumulated a significant amount of money to fund the building of more roads, bridges, and other important infrastructure. Doing this would mean that we achieve “fiscal consolidation,” obtain better sovereign ratings that would guarantee easier and cheaper access to global capital for both the public and private business organizations.

But on the other hand, she seems to be saying she is going to junk the bill being discussed at the Senate ways and means committee, one major proposal of which, is the removal of income tax holidays granted to firms registered with the Board of Investments, to be replaced with a uniform 15 tax percent rate. Some companies and business organizations have been worried that the removal of their income tax holidays would undermine their competitiveness. If President Arroyo was actually to talking to this crowd, then certainly she is telling Senate that their deliberations are going nowhere as she is bent on maintaining the status despite here earlier commitment to reform the country’s fiscal incentive system.

But then again, we don’t really know. She may have been saying that broader economy-wide incentives are in the offing. For instance, what prevents the country from simplifying the incentives regime by wholesale reduction of corporate income tax from the current 36 percent to say 15 percent a la Hongkong and Ireland? Certainly, that will be more attractive to investors as they no longer have to see the face of bureaucrats when setting up their operations here. That policy option shoots several birds in one stone: you address red tape (you could even abolish many of these agencies including the BOI), ensure transparency, and speeds up the process of setting up business.

But who knows? So until this time, the uncertainty continues. And it’s sending a mixed signal to the Senate ways and means committee that is currently crafting the fiscal rationalizations bill. When legislators started discussing the fiscal incentives rationalizations bill, the mood from Malacañang has been towards improving the country’s finances. Now, Malacañang is singing a confusing tune, something that will confuse the investor community even more. It’s this uncertainty that actually drives away foreign investors.

Is there a way out? Joachim von Amsberg, country director of the World Bank in the Philippines, has a concrete set of solutions during that worshop. Allow us to site a few:

First, ensure macroeconomic stability and fiscal sustainability (efficient collection of taxes). Second, continue deregulation in the economy (which could mean no more oligopoly in shipping and port operations). Third, move away from sector or firm specific to economy wide deregulation and incentives (read: why not provide incentives for everybody through a lower corporate income tax across the board?). Fourth, uphold the sanctity of contracts (a contract is a contract is a contract!). Fifth, reduce cost of doing business (no red tape, speed up court processes, no graft). Sixth, ensure open and competitive bidding (no under the table deals). And seventh, further liberalize foreign entry into the financial services sector (read an end to the banking oligopoly).

If we could achieve most of these recommendations, we may realize we may not even need “fiscal incentives.”