Monday, May 08, 2006

Nature pulls in weight for growth

THE advertisements for call centers and other outsourcing firms are still flooding media but don’t expect them to be the superstar this year. This year the credit for boosting economic growth will probably come from the farm sector, at least if the latest rice and corn production estimate is right on cue.

The latest buzz among officials of the agriculture department says that in the first quarter, rice production grew by 7.6 percent, corn by 35 percent, thus lifting up the entire farm sector to a 4.7-4.8 percent growth rate. This is not surprising because these two crops alone account for about 22 percent of the total value of the country’s farm output. Certainly, nature is playing its hand here as adequate rainfall resulting from a mild La Niña has encouraged farmers to plant more agricultural crops, particularly rice and corn. This piece of good news suggests that Filipinos will probably enjoy relatively stable prices of cereals as well as chicken and pork, as corn is a major input in the manufacture of fees for poultry and hogs.

This early pundits are already revising their forecasts for the year. Bank of America recently said the Philippine economy will probably grow by 5.3 percent this year, up from its old forecast of 4.7 percent. The bank said the country’s economy may have expanded 5.6 percent in the first quarter.

This is certainly a happy story for the economy which has been battered by rising international crude prices and the inability of the country’s outsourcing industry to soar even higher because of the worsening labor supply shortfalls. From 2006 to 2010, industry leaders fear the outsourcing industry may suffer a labor shortfall of 273,000 workers unless the government and the private sector come up with a drastic solution.

Right now, even the foreign chambers of commerce (European and American Chambers) are rallying behind the industry by launching an “English is cool!” campaign intended to restore the importance and prestige of the English language in our schools, homes, and society in general. We are now seeing positive initial results, but it’s really too early to tell whether or not we can hurdle the big challenge for the outsourcing industry.

The telecommunications industry has lately been abuzz with the introduction of the third-generation phones, another happy story at the surface but this development may suggest that telcos like Globe and Smart are probably hitting the frontiers of cell phone penetration. They needed a new push, hence the introduction of 3G. But its obvious that 3G phones, owing to high costs, is not likely to take the country by storm.

There is still the manufacturing sector, especially the manufacturers of food and beverage that are raking in the money from disposable incomes, courtesy of the remittance dollars, but it appears that higher inflation rates are forcing many Filipinos into saving their money. That explains why the average capacity utilization of the country’s manufacturing sector appears to have hit a plateau at 80 percent. That is still a decent figure but it means that the sector is not pushing significantly forward, probably because the country’s export sector is not shifting to a higher gear.

The whole point here is that the economy now needs a new source of growth and agriculture’s initial figures came just in time. It’s something that we should be happy about because these encouraging results came at a time when the government simply was not spending enough money to revive the countryside. When farm output expands significantly, broad-based growth ensues, benefiting the countryside, providing more money in the pockets of farmers and agri-entrepreneurs, and enabling them to buy the basic stuff produced by factories, and giving them more resources to send their children to school.

Of course, this is pure luck. Or you may call it Divine mercy because these higher growth figures from the farms have much more to do with nature. The pursuit of “fiscal consolidation” has meant that government has not been providing enough money for the operations and maintenance, much less for capital expenditures that should include economic infrastructure in the countryside. Some credit, though, should go to Agriculture Decretary Domingo Panganiban because of his timely use of “clustering” in corn production that enabled the Department to deliver much-needed farm support at the right time despite limited resources and constraints in rural infrastructure. But the entire show is really about favorable weather.

Which proves our point one more time that the future of the country really lies in broad-based growth where most sectors are contributing to expansion of the entire economic pie. In the last several years, government economic planners and some of their supporters in the academe have been hammering on service-driven growth as something that could save this country from perdition. The services sector certainly has been propping up the economy, but its job-creation capability has been benefiting the urban centers only. Enough of this. We should go back to the basics and do what we always know is the right approach: that the farms, the factories, and services all need to grow together so the economy will bestow the greatest benefit to the greatest number.

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