HAVE extrajudicial killings gone “mainstream” as a tool used by the bad guys to silence those who passionately care for this country?
We hope not, but Sunday’s killing of Audie Auchangco, a member of the National Anti-Environmental Crime Task Force (Naectaf) that enforces environmental laws in this country, seems to indicate so. It is worse enough that killers-for-hire have been blasting to pieces activists and mediamen with impunity. Now, it seems that the destroyers of the environment are using the same method to stop people who protect it.
It’s a sad fact of our national life that needs to be addressed with haste, for this matter has severe implications on the Philippine economy. Especially when one recalls that this is not the first time an extraordinarily brave and no-nonsense forest ranger was killed. Past DENR officials a few years ago had called attention to the fact that nearly a dozen such environmental stewards had been killed in line of duty in just a short time.
According to sources from environmental NGOs, Auchangco was shot by gunmen riding a motorcycle in broad daylight in Lucena City on the same day that the world was celebrating Earth Day. He sustained 11 gunshot wounds in the head and body, killing him instantly. We have yet to see the results of the police investigation but there are indications that his death may have something to do with his efforts to curb illegal logging in Sierra Madre.
Sources from the NGO movement say Auchangco was part of the team that implemented “Oplan Baykuran” that led to the confiscation of illegally cut logs from Quezon province and the Rizal portion of the Southern Sierra Madre. He had been working to stop illegal logging operations in Agusan provinces, Cebu and Mindanao during the time of his murder.
That he was murdered right during Earth Day in broad daylight shows just how these criminal elements have become so brazen—the same point that human-rights groups have been raising, to those who’d care to listen, i.e., that it’s not the numbers of victims per se that have become alarming, but the impunity with which they were exterminated.
These criminals seem to be taunting law enforcers that they can do their worst anytime and nothing can be done about it. The government, therefore, should mobilize adequate resources to track down the killers and bring them to justice.
Authorities should look at this latest murder as something that already treads on the fragile state of the economy, and our capability to bring development to people living in the hinterlands. The killing certainly wrought a chilling effect on law enforcers, employees and staff government agencies, as well as civil-society organizations working for the conservation and preservation of the forests, rivers, and mountains. Should this go unchecked, the destruction of the country’s remaining forests will accelerate, thus aggravating the economic and environmental woes.
Certainly, this problem will have an immediate economic impact, especially on the lives of the poor. On a quarterly basis, agriculture, fishery and forestry contributes 16 percent to 19 percent of the country’s gross domestic product and employs 35 percent of the country’s labor force. And because of the farm and forestry sector’s strong links with the rest of the economy, stronger growth rates generated by agriculture, fishery and forestry normally boosts both the industry and services sector as well.
But what few people appreciate is that a significant part of the farm sector’s output relies on the state of health of ecosystems that start up right there in the mountains covered by vegetation. Once this forest cover is removed by means like illegal logging and slash-burn farming, there won’t be much water left for the irrigation systems that nurture the rice fields, corn fields and orchards.
For a long time now, we have been exporting a lot of nature- and farm-based products like bananas, pineapples, rattan products, asparagus, fruits and vegetables. We have been earning billions of dollars from tourists who come to see nature’s bounty in the Philippines. These are economic activities that support the livelihood of millions of poor people.
Once the mountains and forests are destroyed simply because the government couldn’t deal with illegal loggers and other rapists of nature, we would eventually have to kiss these industries goodbye. Once the forests in the Sierra Madre Mountains, as well as other critical ecosystems like La Mesa, are gone, residents of Metro Manila will go thirsty.
Of course, most cities in the country are very much dependent on river and forest systems for drinking water, irrigation, for its factories and offices. A collapse of the country’s ecosystems would have a severe economic impact on towns and cities. That sounds like an apocalyptic warning, but even these days there are indications that many urban water sources are getting less productive due to environmental destruction. And that’s, as Al Gore puts it, the inconvenient truth.
It’s high time the government starts bringing fear to the hearts of elements that are not only murdering and maiming people but also destroying the environment, the prospects of the Philippine economy, and our children’s future. Few crimes could be as heinous. (Note: prepared as editorial for BusinessMirror, 24 2007)
Monday, April 23, 2007
Wednesday, April 18, 2007
Another RP ‘record’ (sigh)
DO you know why the annual 5-percent to 6-percent growth of the Philippine economy in the last four years is not generating enough jobs or touching people’s lives? Do you know why, despite all the gains the country has achieved through fiscal reforms, more and more people are saying they are poorer than ever?
Part of the answer to these questions probably lies in the recent survey done by the UPS Asia Business Monitor, saying that the small and medium enterprises (SMEs) in the Philippines are the “least competitive” in Asia. Least competitive is actually a polite word for “laggards.” The survey did not mention the reason for SMEs’ lack of competitiveness vis-à-vis its counterparts in Asia, but we could hazard an educated guess.
First, companies, especially SMEs, can only thrive in an atmosphere of growth. Of all the countries in Asia, the country’s “decent growth” of 5 percent to 6 percent is actually just a recent phenomenon that started in 2003, owing to the recent surge in remittances, the recovery of electronics and the rise in outsourcing.
More people, losing faith in the economy’s capability to fulfill their dreams for a better life, are leaving and sending more money home. Depressed wages for office workers have attracted foreigners to set up call centers. Voila!—the economy grew sans government direction. The government, all these years, has largely been so preoccupied with addressing the budget deficit that it completely ignored growth-oriented measures.
Second, the nature of the country’s recent growth, while encouraging from a job-creation point of view, simply highlights the entrepôt nature of the country’s economy.
The classic example here is the electronics and semiconductors industry, which depend highly on imported raw materials. Don’t get us wrong, we are all happy with the way the electronics industry is growing and hiring hundreds of thousands of workers, and therefore supporting the growth of certain ancillary support services industry like logistics. What we are saying is that electronics and semiconductors are not the type of industries that nurture local manufacturing SMEs through forward and backward linkages.
The third reason has something to do with the globalization of the Philippine labor market. Again, we are saying that giving workers all the options to work anywhere they want is a very good policy. We have been doing that the last 30 years now.
But it bears noting that if there are companies that are hit the hardest from the continuing diaspora of talents in the Asia-Pacific region, these are the SMEs. Since most of them could probably not pay higher-salary rates for skilled workers compared to their counterparts in big business, they are the ones who are likely to be abandoned by their skilled staff in favor of jobs among multinationals here or abroad.
That trend is fine really, if only the schools are producing enough knowledge workers. Given the current circumstances, SMEs are the ones that are finding it hard to find talents or retain them.
And fourth, SMEs are the most vulnerable to government neglect and stupid government policy. They are the ones whose costs easily bloat when roads are not passable or when raw materials are protected by high tariff walls; or worse, when red tape and extortion stand in the way of efficient transactions with the government.
They usually have limited working capital and, hence, have limited options when the banks find them “not bankable” enough. They are the ones who lose money when the market ignores their products for lack of granular knowledge of their markets and the latest lifestyle trends, simply because the government has not supported their research and development efforts. They are the ones who suffer and lose contracts when bureaucrats demand bribes or make their business difficult simply because most of them do not have political clout.
All these constraints are unfortunate considering that, according to oft-cited estimates, close to 90 percent of the country’s work force are employed in SMEs. If the government is serious about addressing poverty, the SMEs hold the key. Most of them are using labor-intensive operations and giving them the much-needed boost would surely go a long way in addressing joblessness.
Given all these constraints, is there really anything that the government could do to improve their competitiveness? A lot, actually.
First, the government has to get on with progrowth strategies and it would help a lot if politics in the country is stable. Remember that “super-regions” initiative that the government promised in the last State of the Nation Address? A lot of the projects mentioned in that strategy dealt with infrastructure development that should help SMEs. But so far, the government has nothing to show for that initiative.
In the first two months of the year, the government expenditure on infrastructure rose only by 2 percent, according to newspaper reports this week. If one considers inflation trends, that figure suggests that government expenditure on infrastructure is actually lower than last year’s figure.
We don’t deny the fact that some government agencies do have projects for SMEs. A press release this week from the Department of Industry said that the department and the Development Bank of the Philippines have just signed a memorandum of agreement for a P15-billion loan facility for SMEs.
But all these initiatives would really not be effective if the government cannot provide a good environment for business, in general. How many loan programs in the past came to naught because of unfavorable policy environment? There are just too many to mention them here. Ultimately, enhancing the growth of SMEs really depends on the overall economic and political context in the country.
In fact, direct government actions sometimes simply falter because they are often done with political considerations in mind. For instance, that press release about the P15-billion SME loan program came on election season, inviting suspicion of the timing and observations that the government is trying to do so little and so late.
One hopes this just isn’t the case. (Note: prepared as an editorial piece for the BusinessMirror, 19 April 2007)
Part of the answer to these questions probably lies in the recent survey done by the UPS Asia Business Monitor, saying that the small and medium enterprises (SMEs) in the Philippines are the “least competitive” in Asia. Least competitive is actually a polite word for “laggards.” The survey did not mention the reason for SMEs’ lack of competitiveness vis-à-vis its counterparts in Asia, but we could hazard an educated guess.
First, companies, especially SMEs, can only thrive in an atmosphere of growth. Of all the countries in Asia, the country’s “decent growth” of 5 percent to 6 percent is actually just a recent phenomenon that started in 2003, owing to the recent surge in remittances, the recovery of electronics and the rise in outsourcing.
More people, losing faith in the economy’s capability to fulfill their dreams for a better life, are leaving and sending more money home. Depressed wages for office workers have attracted foreigners to set up call centers. Voila!—the economy grew sans government direction. The government, all these years, has largely been so preoccupied with addressing the budget deficit that it completely ignored growth-oriented measures.
Second, the nature of the country’s recent growth, while encouraging from a job-creation point of view, simply highlights the entrepôt nature of the country’s economy.
The classic example here is the electronics and semiconductors industry, which depend highly on imported raw materials. Don’t get us wrong, we are all happy with the way the electronics industry is growing and hiring hundreds of thousands of workers, and therefore supporting the growth of certain ancillary support services industry like logistics. What we are saying is that electronics and semiconductors are not the type of industries that nurture local manufacturing SMEs through forward and backward linkages.
The third reason has something to do with the globalization of the Philippine labor market. Again, we are saying that giving workers all the options to work anywhere they want is a very good policy. We have been doing that the last 30 years now.
But it bears noting that if there are companies that are hit the hardest from the continuing diaspora of talents in the Asia-Pacific region, these are the SMEs. Since most of them could probably not pay higher-salary rates for skilled workers compared to their counterparts in big business, they are the ones who are likely to be abandoned by their skilled staff in favor of jobs among multinationals here or abroad.
That trend is fine really, if only the schools are producing enough knowledge workers. Given the current circumstances, SMEs are the ones that are finding it hard to find talents or retain them.
And fourth, SMEs are the most vulnerable to government neglect and stupid government policy. They are the ones whose costs easily bloat when roads are not passable or when raw materials are protected by high tariff walls; or worse, when red tape and extortion stand in the way of efficient transactions with the government.
They usually have limited working capital and, hence, have limited options when the banks find them “not bankable” enough. They are the ones who lose money when the market ignores their products for lack of granular knowledge of their markets and the latest lifestyle trends, simply because the government has not supported their research and development efforts. They are the ones who suffer and lose contracts when bureaucrats demand bribes or make their business difficult simply because most of them do not have political clout.
All these constraints are unfortunate considering that, according to oft-cited estimates, close to 90 percent of the country’s work force are employed in SMEs. If the government is serious about addressing poverty, the SMEs hold the key. Most of them are using labor-intensive operations and giving them the much-needed boost would surely go a long way in addressing joblessness.
Given all these constraints, is there really anything that the government could do to improve their competitiveness? A lot, actually.
First, the government has to get on with progrowth strategies and it would help a lot if politics in the country is stable. Remember that “super-regions” initiative that the government promised in the last State of the Nation Address? A lot of the projects mentioned in that strategy dealt with infrastructure development that should help SMEs. But so far, the government has nothing to show for that initiative.
In the first two months of the year, the government expenditure on infrastructure rose only by 2 percent, according to newspaper reports this week. If one considers inflation trends, that figure suggests that government expenditure on infrastructure is actually lower than last year’s figure.
We don’t deny the fact that some government agencies do have projects for SMEs. A press release this week from the Department of Industry said that the department and the Development Bank of the Philippines have just signed a memorandum of agreement for a P15-billion loan facility for SMEs.
But all these initiatives would really not be effective if the government cannot provide a good environment for business, in general. How many loan programs in the past came to naught because of unfavorable policy environment? There are just too many to mention them here. Ultimately, enhancing the growth of SMEs really depends on the overall economic and political context in the country.
In fact, direct government actions sometimes simply falter because they are often done with political considerations in mind. For instance, that press release about the P15-billion SME loan program came on election season, inviting suspicion of the timing and observations that the government is trying to do so little and so late.
One hopes this just isn’t the case. (Note: prepared as an editorial piece for the BusinessMirror, 19 April 2007)
Monday, April 16, 2007
President Arroyo may not be serious about her growth target
IS the government really serious about its objective of attaining a higher (read 6-percent to 7-percent) growth rate or not?
In the last several months, no less than the President herself said that her government is gunning for 7 percent to 9 percent in the next three years, encouraged by the statement from the private sector that they are willing to support such an initiative. The only way the government could achieve that fairly quickly is by raising public expenditure on infrastructure.
Several months after, the government still has nothing to show for it. In fact, Monday’s report by this paper’s reporter, Jun Vallecera, showed that even in the first two months this year, a few months prior to the mid-term election, government expenditure on infrastructure development has remained stagnant. What’s happening?
In the last several years, the Philippine economy has shown itself capable of growing more than 5 percent to 6 percent, buoyed largely by high personal consumption expenditure financed largely by OFW remittances and the fast-growing services sector. This growth performance, however decent, couldn’t soak up joblessness owing to two major factors.
First, the activities generated by the services sector are generally urban-based, implying that the rural sector, or even those who are in the urban fringes, are not benefited.
Second, the kinds of jobs generated in the services sector these days are primarily technology-driven, requiring workers who are highly skilled and educated, thus leaving unskilled ones to rot in the slums and the hopelessness of the underground economy.
And third, the government has been remiss in its role in terms of providing adequate infrastructure investments, especially those that provide links between and among the major economic centers, thus restricting the country’s overall growth potentials.
Hence, if the government wants to kick off higher growth, then quick, higher government investments in infrastructure development is the key, assuming it has undergone honest-to-goodness and transparent project planning. Higher infrastructure spending immediately translates to higher purchases of construction materials like cement, steel products, sand and gravel, and wood products. In turn, greater activities in these sectors translate to more jobs and higher purchasing power for food, beverage, and other wage goods.
The multiplier effects of these industries are very high as the private sector—seeing that the government is pouring money into roads, bridges and other vital economic infrastructure—is going to have the confidence to pursue with their own investment plans.
In the last three years, private investments in the country have been lackluster owing to the business managers’ wait-and-see attitude. This is clearly manifested in the low importation of capital equipment, as well as flat growth in the economy’s capital formation.
This means that the private sector is waiting for a signal from the government; a trigger. And what better way for the government to unleash this optimism for job-creating decisions than by opening up the spigots for higher public sector investments on infrastructure?
In the last five years, robust foreign markets, because of the emergence of China and India, and the continuing strength of the American economy, have been underpinning the growth of the Philippine economy. That explains the continuing expansion of the country’s exports of electronics and garments.
But the country’s export sector can’t do it alone for the entire Philippine economy, not only because of the rising peso, but because of poor infrastructure. With poor roads and bridges, as well as an inefficient transport system, exporters are likely to import raw materials rather than buy them from local farmers and rural producers. That’s the reason why we can’t just produce enough economic activities in the countryside. That also means factories are likely to be located close to urban centers and bypass the countryside where labor is supposedly abundant and wages low.
Or they will bypass the entire country in favor of the cheaper location like Vietnam or China. Compared to its Asian neighbors, the Philippines now has among the highest wage rates and that problem is related to the country’s poor infrastructure.
When the cost of producing and transporting food stuff is high, workers are likely to agitate for higher wages to cover for the rising cost of living standards. That is one of the major reasons why despite higher joblessness, wages in this country are rising. So if we want to improve our global competitiveness, we better move faster on infrastructure investments.
Of course, higher investments in infrastructure are crucial in improving the livability of our cities and the quality of our lives. Right now, the country’s urban-driven growth trajectory is accelerating urban primacy and aggravating the polarization between the countryside and the cities. With stagnant productivity in the country, rural-urban migration is accelerating, the main reason why we can’t seem to address the shortages of shelters, traffic congestion, and urban pollution.
The question right now is this: why can’t government move faster on this? Is it plain incompetence? Is it plain inertia after years of spending nothing in pursuit of “fiscal consolidation?” Has the party in power exhausted all its energies?
Or maybe the reason is more basic—that despite all the talk about fiscal consolidation, there is really no money to spend in the first place because it has been earmarked for some election-related purposes. The government had better come up with credible explanations, for what’s at stake is public confidence and the country’s future. And soon! (Originally prepared as Editorial for BusinessMirror, 17 April 2007)
In the last several months, no less than the President herself said that her government is gunning for 7 percent to 9 percent in the next three years, encouraged by the statement from the private sector that they are willing to support such an initiative. The only way the government could achieve that fairly quickly is by raising public expenditure on infrastructure.
Several months after, the government still has nothing to show for it. In fact, Monday’s report by this paper’s reporter, Jun Vallecera, showed that even in the first two months this year, a few months prior to the mid-term election, government expenditure on infrastructure development has remained stagnant. What’s happening?
In the last several years, the Philippine economy has shown itself capable of growing more than 5 percent to 6 percent, buoyed largely by high personal consumption expenditure financed largely by OFW remittances and the fast-growing services sector. This growth performance, however decent, couldn’t soak up joblessness owing to two major factors.
First, the activities generated by the services sector are generally urban-based, implying that the rural sector, or even those who are in the urban fringes, are not benefited.
Second, the kinds of jobs generated in the services sector these days are primarily technology-driven, requiring workers who are highly skilled and educated, thus leaving unskilled ones to rot in the slums and the hopelessness of the underground economy.
And third, the government has been remiss in its role in terms of providing adequate infrastructure investments, especially those that provide links between and among the major economic centers, thus restricting the country’s overall growth potentials.
Hence, if the government wants to kick off higher growth, then quick, higher government investments in infrastructure development is the key, assuming it has undergone honest-to-goodness and transparent project planning. Higher infrastructure spending immediately translates to higher purchases of construction materials like cement, steel products, sand and gravel, and wood products. In turn, greater activities in these sectors translate to more jobs and higher purchasing power for food, beverage, and other wage goods.
The multiplier effects of these industries are very high as the private sector—seeing that the government is pouring money into roads, bridges and other vital economic infrastructure—is going to have the confidence to pursue with their own investment plans.
In the last three years, private investments in the country have been lackluster owing to the business managers’ wait-and-see attitude. This is clearly manifested in the low importation of capital equipment, as well as flat growth in the economy’s capital formation.
This means that the private sector is waiting for a signal from the government; a trigger. And what better way for the government to unleash this optimism for job-creating decisions than by opening up the spigots for higher public sector investments on infrastructure?
In the last five years, robust foreign markets, because of the emergence of China and India, and the continuing strength of the American economy, have been underpinning the growth of the Philippine economy. That explains the continuing expansion of the country’s exports of electronics and garments.
But the country’s export sector can’t do it alone for the entire Philippine economy, not only because of the rising peso, but because of poor infrastructure. With poor roads and bridges, as well as an inefficient transport system, exporters are likely to import raw materials rather than buy them from local farmers and rural producers. That’s the reason why we can’t just produce enough economic activities in the countryside. That also means factories are likely to be located close to urban centers and bypass the countryside where labor is supposedly abundant and wages low.
Or they will bypass the entire country in favor of the cheaper location like Vietnam or China. Compared to its Asian neighbors, the Philippines now has among the highest wage rates and that problem is related to the country’s poor infrastructure.
When the cost of producing and transporting food stuff is high, workers are likely to agitate for higher wages to cover for the rising cost of living standards. That is one of the major reasons why despite higher joblessness, wages in this country are rising. So if we want to improve our global competitiveness, we better move faster on infrastructure investments.
Of course, higher investments in infrastructure are crucial in improving the livability of our cities and the quality of our lives. Right now, the country’s urban-driven growth trajectory is accelerating urban primacy and aggravating the polarization between the countryside and the cities. With stagnant productivity in the country, rural-urban migration is accelerating, the main reason why we can’t seem to address the shortages of shelters, traffic congestion, and urban pollution.
The question right now is this: why can’t government move faster on this? Is it plain incompetence? Is it plain inertia after years of spending nothing in pursuit of “fiscal consolidation?” Has the party in power exhausted all its energies?
Or maybe the reason is more basic—that despite all the talk about fiscal consolidation, there is really no money to spend in the first place because it has been earmarked for some election-related purposes. The government had better come up with credible explanations, for what’s at stake is public confidence and the country’s future. And soon! (Originally prepared as Editorial for BusinessMirror, 17 April 2007)
Tuesday, April 10, 2007
Rising food import bill need not be a problem
ON Monday, Genuine Opposition senatorial candidate Aquilino Pimentel III deplored the country’s rising import bills, stressing that the statistics signal agricultural production woes, and called for a review of the country’s tariff liberalization program.
“Clearly, we must reexamine our tariff policy on agricultural products,” he said. “We must provide our farmers with the same protection that the US, Europe and Japan provide their own farmers. We should prioritize local food production so that we will be less dependent on imports.”
First, Pimentel must be commended for bringing up the matter for public discussion. So far he is the only one who has broached such a very important issue in the campaign.
This is important because, on the same day he spoke, the Food and Agricultural Organization (FAO) released a report putting the Philippines on a list of 33 countries supposedly needing “external assistance.” FAO has put the Philippines on the same list as Iraq—of countries that supposedly run the risk of facing “an exceptional shortfall in the aggregate food production/supplies as a result of crop failure, natural disasters, interruption of imports, disruption of distribution, excessive postharvest losses, and other supply bottlenecks.”
For all its good intentions, the report is phrased in a way that the Philippines ends up looking like part of a dark continent that is regularly plagued by perpetual warfare and drought, and not in the Asia-Pacific, a region enjoying relative stability and frenetic economic growth.
Nevertheless, Pimentel’s concern about the rising import bill is a valid concern that needs to be examined, especially in light of the continuing government failure to invest in rural infrastructure.
The relevant questions here are the following: First, is the rising food import bill necessarily bad? Second, is raising tariff protection for agricultural products the key to food security? Third, are we actually capable of producing all our food requirements within the country’s borders? And fourth, given the reality in the countryside, what are the best ways to ensure food security?
On the first, a rising food import bill is not necessarily bad. Rising imports of certain food items like cereals, meat, fruits and dairy products could actually suggest welfare gains for ordinary people. It means that increasingly, people have access to a variety of cheaper—but quality—food choices that could be good for their health. It used to be that only the rich could afford grapes, oranges and apples. And we eat them on top of our usual fare of mango, bananas and pineapples. Now, most everyone can afford them.
Given the fact that more than half of ordinary people’s expenditures are on food and beverage products, those food-import numbers may suggest that cheaper food items act as a brake on the erosion of people’s purchasing power, thus giving them extra cash for other needs like medicine, recreation and education-related expenditures. And mind you, the country’s food import bill actually accounts for only 5 percent of the country’s total imports.
Is tariff protection the key to food security? The answer to this would depend on our own policy objectives. If we would like to produce all, if not most, of our food items within the country’s borders at all cost, then tariff protection is probably important.
But that means that we have to bear with very expensive food items, probably double the price in the international market. Given the fact that 60 percent of the country’s population is in urban towns and cities, a policy environment that encourages high food prices could trigger social unrest. Besides, once local prices go up significantly higher than world market prices, high tariff protection could easily trigger massive smuggling of the same products enjoying high tariff protection. If there’s one “sector” that’s going to benefit, that would be the smugglers and corrupt bureaucrats at the Bureau of Customs.
Supposing we decide to stop food imports, can we actually produce all our food items, especially rice? No. One major constraint is geography and climate.
Compared to neighbors like Vietnam and Thailand, rainfall patterns and distribution here do not allow for a massive expansion of irrigated areas for rice. Compared to Vietnam and Thailand, the Philippines does not have great river systems from which to draw water for massive irrigation networks.
Given this limitation, we are bound to producing the bulk of our food requirements while importing some of them. That is happening right now and the absolute figures are rising because of several factors like population growth and changes in lifestyle and tastes among Filipinos.
What we are saying here is that the Philippines’s optimal crop mix is probably different from those of our neighbors. While we are going to continue producing cereals like rice and corn in strategic areas that are highly competitive against imports, much of our export competitiveness probably lies in the production and export of high-value crops (e.g. asparagus, bananas, pineapple, ornamentals, cutflowers, mango, durian, papaya, fruits, among others), cattle fattening, and other niche products that do not require massive networks of irrigation systems.
We could produce them in greater quantities either for local consumption and export using water-efficient systems including drip irrigation. Under a liberalized trading environment, exporting these products to China and the rest of the Asia-Pacific region should be a lot easier.
The point here is that it doesn’t matter whether or not you have a $2-billion food import bill for as long as you have an equally robust revenue stream from selling these high-value crops to the rest of the world. If we achieve that, purchasing the foodstuff that the country needs is not much of a problem. That’s the best way we could ensure our own “food security.”
Here lies the real problem because despite the growing opportunities for agricultural exports under a liberalized trading environment, the Philippines remains a net food importer. The problem is not in trade liberalization per se, but in the continuing failure of the government to invest in rural infrastructure, research and development, and farm support services.
Following the formation of the World Trade Organization, Congress drafted the Agriculture and Fisheries Modernization Act as a way to deal with a liberalized trading environment. Nothing has been heard about it since the last five years. The irony is that whatever money we had in the past for “agricultural modernization” was lost in scams, the most notorious being the unresolved fertilizer scam.
Having clarified the issues, we think Pimentel should continue his advocacy for the betterment of the agricultural sector. It would be more productive if he could zero in on the government’s continuing failure to provide the promised “competitiveness-enhancement measures,” as well as the continuing inefficiencies in the interisland shipping sector brought about by stupid government policies (e.g., one-port, one-operator rule). If he or his party could really push this matter into the forefront of the debate in the midterm elections, he will be doing the country a great service. (Originally prepared as editorial for the BusinessMirror, April 11, 2007).
“Clearly, we must reexamine our tariff policy on agricultural products,” he said. “We must provide our farmers with the same protection that the US, Europe and Japan provide their own farmers. We should prioritize local food production so that we will be less dependent on imports.”
First, Pimentel must be commended for bringing up the matter for public discussion. So far he is the only one who has broached such a very important issue in the campaign.
This is important because, on the same day he spoke, the Food and Agricultural Organization (FAO) released a report putting the Philippines on a list of 33 countries supposedly needing “external assistance.” FAO has put the Philippines on the same list as Iraq—of countries that supposedly run the risk of facing “an exceptional shortfall in the aggregate food production/supplies as a result of crop failure, natural disasters, interruption of imports, disruption of distribution, excessive postharvest losses, and other supply bottlenecks.”
For all its good intentions, the report is phrased in a way that the Philippines ends up looking like part of a dark continent that is regularly plagued by perpetual warfare and drought, and not in the Asia-Pacific, a region enjoying relative stability and frenetic economic growth.
Nevertheless, Pimentel’s concern about the rising import bill is a valid concern that needs to be examined, especially in light of the continuing government failure to invest in rural infrastructure.
The relevant questions here are the following: First, is the rising food import bill necessarily bad? Second, is raising tariff protection for agricultural products the key to food security? Third, are we actually capable of producing all our food requirements within the country’s borders? And fourth, given the reality in the countryside, what are the best ways to ensure food security?
On the first, a rising food import bill is not necessarily bad. Rising imports of certain food items like cereals, meat, fruits and dairy products could actually suggest welfare gains for ordinary people. It means that increasingly, people have access to a variety of cheaper—but quality—food choices that could be good for their health. It used to be that only the rich could afford grapes, oranges and apples. And we eat them on top of our usual fare of mango, bananas and pineapples. Now, most everyone can afford them.
Given the fact that more than half of ordinary people’s expenditures are on food and beverage products, those food-import numbers may suggest that cheaper food items act as a brake on the erosion of people’s purchasing power, thus giving them extra cash for other needs like medicine, recreation and education-related expenditures. And mind you, the country’s food import bill actually accounts for only 5 percent of the country’s total imports.
Is tariff protection the key to food security? The answer to this would depend on our own policy objectives. If we would like to produce all, if not most, of our food items within the country’s borders at all cost, then tariff protection is probably important.
But that means that we have to bear with very expensive food items, probably double the price in the international market. Given the fact that 60 percent of the country’s population is in urban towns and cities, a policy environment that encourages high food prices could trigger social unrest. Besides, once local prices go up significantly higher than world market prices, high tariff protection could easily trigger massive smuggling of the same products enjoying high tariff protection. If there’s one “sector” that’s going to benefit, that would be the smugglers and corrupt bureaucrats at the Bureau of Customs.
Supposing we decide to stop food imports, can we actually produce all our food items, especially rice? No. One major constraint is geography and climate.
Compared to neighbors like Vietnam and Thailand, rainfall patterns and distribution here do not allow for a massive expansion of irrigated areas for rice. Compared to Vietnam and Thailand, the Philippines does not have great river systems from which to draw water for massive irrigation networks.
Given this limitation, we are bound to producing the bulk of our food requirements while importing some of them. That is happening right now and the absolute figures are rising because of several factors like population growth and changes in lifestyle and tastes among Filipinos.
What we are saying here is that the Philippines’s optimal crop mix is probably different from those of our neighbors. While we are going to continue producing cereals like rice and corn in strategic areas that are highly competitive against imports, much of our export competitiveness probably lies in the production and export of high-value crops (e.g. asparagus, bananas, pineapple, ornamentals, cutflowers, mango, durian, papaya, fruits, among others), cattle fattening, and other niche products that do not require massive networks of irrigation systems.
We could produce them in greater quantities either for local consumption and export using water-efficient systems including drip irrigation. Under a liberalized trading environment, exporting these products to China and the rest of the Asia-Pacific region should be a lot easier.
The point here is that it doesn’t matter whether or not you have a $2-billion food import bill for as long as you have an equally robust revenue stream from selling these high-value crops to the rest of the world. If we achieve that, purchasing the foodstuff that the country needs is not much of a problem. That’s the best way we could ensure our own “food security.”
Here lies the real problem because despite the growing opportunities for agricultural exports under a liberalized trading environment, the Philippines remains a net food importer. The problem is not in trade liberalization per se, but in the continuing failure of the government to invest in rural infrastructure, research and development, and farm support services.
Following the formation of the World Trade Organization, Congress drafted the Agriculture and Fisheries Modernization Act as a way to deal with a liberalized trading environment. Nothing has been heard about it since the last five years. The irony is that whatever money we had in the past for “agricultural modernization” was lost in scams, the most notorious being the unresolved fertilizer scam.
Having clarified the issues, we think Pimentel should continue his advocacy for the betterment of the agricultural sector. It would be more productive if he could zero in on the government’s continuing failure to provide the promised “competitiveness-enhancement measures,” as well as the continuing inefficiencies in the interisland shipping sector brought about by stupid government policies (e.g., one-port, one-operator rule). If he or his party could really push this matter into the forefront of the debate in the midterm elections, he will be doing the country a great service. (Originally prepared as editorial for the BusinessMirror, April 11, 2007).
How to attract investments? Let me count the ways
THE Philippines, the World Bank says in its latest report, continues to lag behind its neighbors in the Asia-Pacific region in terms of attracting foreign direct investments.
Of course, that’s hardly new. We have been suffering that trend in the last decade or so. But can we really reverse it? Can the Philippines, given the current economic and political realities, devise a strategy to address the problem?
We say yes, assuming the present dispensation still has energy left for a three-year push until 2010. Below are a few ideas.
Before coming to that, though, we should welcome two important pieces of news that should help us generate more investments in the next few years.
First, the Bangko Sentral ng Pilipinas (BSP) recently released its Business Expectations Survey (BES) report indicating the continuing rise in business confidence since the last quarter of 2005. In the first quarter of 2007, the BES traces the optimism to these factors: greater business opportunities in the run-up to the May election; improvement in the macroeconomic fundamentals (low inflation, stronger peso, low interest rate and improved fiscal position); increase in consumer demand; and rollback in oil and petroleum prices. Business optimism, BES says, is broad-based and an increasing number of firms are expecting to embark on expansion programs.
The second piece of encouraging news is the report indicating that the country’s savings rate has now reached more than 30 percent, or on a par with our neighbors. The government admits that this higher savings rate is largely due to the higher remittances sent home by overseas workers. It’s quite clear that families of overseas Filipinos are saving their money in the bank, contrary to earlier notions about remittance dollars being squandered on conspicuous consumption.
Both factors—improved and sustained business confidence as well as higher savings rate—should boost the country’s chances of generating investments, both locally generated and foreign direct investments (FDIs). How?
According to the United Nations Development Program (UNDP), three major factors explain the inflows of FDIs, namely economic, government policy and strategy by transnational corporations.
Economic factors would depend on variables like the size of the market, the level of urbanization, access to regional and global markets, among others. They would also depend on labor availability, cost, skills availability, infrastructure, level of technological development and the presence of strong financial markets.
Certainly, the rising flows of remittances from overseas workers boost the size of the local market through higher domestic demand that should make the Philippines more attractive to FDIs. The continuing high unemployment and underemployment rates suggest the continuing availability of skills and labor. Also, the continuing diaspora of skilled professionals, while a negative trend, could also be read as an indicator that the Philippines is actually producing a surplus of talents. That means that in terms of the first determinant (economic factors), all the government could do is to complement these positive aspects by focusing its resources on infrastructure development.
Perhaps, what the Neda could do to inspire confidence is to come up with a detailed list of these infrastructure projects and related information like funding sources and timetables, so that the public can help ensure that these investments are really put in areas where economic and social returns are high.
Government policies, the second most important FDI determinant, are crucial. Among the most important variables are the soundness of macroeconomic policy, promotion of private ownership and participation, relaxed rules on entry and exit, greater integration with the rest of the world through trade, and transparent and predictable rules, among many others.
Certainly, the government has gained so much headway in terms of lowering inflation and interest rates, and improving the fiscal indicators. The government therefore should now focus its energies on delivering a strong signal for a transparent and predictable set of rules in government investments.
There are many ways to do it but initiatives like simplified business-registration procedures, transparent bidding rules and the passage of the Freedom of Information Act should give the public access to important contracts.
And better still, the current administration and its allies in Congress should once and for all drop all its intentions for a Charter change to take away the notion that the government is going to change the rules of the game once the dust settles after the May elections. If there’s one thing that’s really putting a lot of uncertainty in the economic horizon, it’s the Charter-change initiative which has been raising the specter of wholesale and unpredictable reverses in economic and social policies that were enshrined in the Constitution after the 1986 Edsa Revolution.
The third most important determinant is the TNC strategy. Multinationals make decisions to invest in a country based on two things: their perception of risk and rewards and political stability, as well as their own strategies on location, sourcing of inputs and services, and technology transfer, among others. They will invest if they think the country has what it takes to handle the complexities of their global operations in the most cost-effective manner. And they would do so if they could divine the trajectory of local politics and are assured that they are not putting the lives of their executives in harm’s way.
Of course, much of those perceptions about the Philippines are just that—perceptions. But perceptions are important inputs in investment decisions and it would help the country a lot if those already doing business here are confident about the country’s prospects. That is why the recent BES report is a very important piece of information. Again, the government could complement this trend by committing to clean, credible and orderly elections in May. That’s the least the party in power now could do to improve investors’ perception of the Philippines as an investment destination. (Originally prepared as an editorial piece for the BusinessMirror, April 10, 2007)
Of course, that’s hardly new. We have been suffering that trend in the last decade or so. But can we really reverse it? Can the Philippines, given the current economic and political realities, devise a strategy to address the problem?
We say yes, assuming the present dispensation still has energy left for a three-year push until 2010. Below are a few ideas.
Before coming to that, though, we should welcome two important pieces of news that should help us generate more investments in the next few years.
First, the Bangko Sentral ng Pilipinas (BSP) recently released its Business Expectations Survey (BES) report indicating the continuing rise in business confidence since the last quarter of 2005. In the first quarter of 2007, the BES traces the optimism to these factors: greater business opportunities in the run-up to the May election; improvement in the macroeconomic fundamentals (low inflation, stronger peso, low interest rate and improved fiscal position); increase in consumer demand; and rollback in oil and petroleum prices. Business optimism, BES says, is broad-based and an increasing number of firms are expecting to embark on expansion programs.
The second piece of encouraging news is the report indicating that the country’s savings rate has now reached more than 30 percent, or on a par with our neighbors. The government admits that this higher savings rate is largely due to the higher remittances sent home by overseas workers. It’s quite clear that families of overseas Filipinos are saving their money in the bank, contrary to earlier notions about remittance dollars being squandered on conspicuous consumption.
Both factors—improved and sustained business confidence as well as higher savings rate—should boost the country’s chances of generating investments, both locally generated and foreign direct investments (FDIs). How?
According to the United Nations Development Program (UNDP), three major factors explain the inflows of FDIs, namely economic, government policy and strategy by transnational corporations.
Economic factors would depend on variables like the size of the market, the level of urbanization, access to regional and global markets, among others. They would also depend on labor availability, cost, skills availability, infrastructure, level of technological development and the presence of strong financial markets.
Certainly, the rising flows of remittances from overseas workers boost the size of the local market through higher domestic demand that should make the Philippines more attractive to FDIs. The continuing high unemployment and underemployment rates suggest the continuing availability of skills and labor. Also, the continuing diaspora of skilled professionals, while a negative trend, could also be read as an indicator that the Philippines is actually producing a surplus of talents. That means that in terms of the first determinant (economic factors), all the government could do is to complement these positive aspects by focusing its resources on infrastructure development.
Perhaps, what the Neda could do to inspire confidence is to come up with a detailed list of these infrastructure projects and related information like funding sources and timetables, so that the public can help ensure that these investments are really put in areas where economic and social returns are high.
Government policies, the second most important FDI determinant, are crucial. Among the most important variables are the soundness of macroeconomic policy, promotion of private ownership and participation, relaxed rules on entry and exit, greater integration with the rest of the world through trade, and transparent and predictable rules, among many others.
Certainly, the government has gained so much headway in terms of lowering inflation and interest rates, and improving the fiscal indicators. The government therefore should now focus its energies on delivering a strong signal for a transparent and predictable set of rules in government investments.
There are many ways to do it but initiatives like simplified business-registration procedures, transparent bidding rules and the passage of the Freedom of Information Act should give the public access to important contracts.
And better still, the current administration and its allies in Congress should once and for all drop all its intentions for a Charter change to take away the notion that the government is going to change the rules of the game once the dust settles after the May elections. If there’s one thing that’s really putting a lot of uncertainty in the economic horizon, it’s the Charter-change initiative which has been raising the specter of wholesale and unpredictable reverses in economic and social policies that were enshrined in the Constitution after the 1986 Edsa Revolution.
The third most important determinant is the TNC strategy. Multinationals make decisions to invest in a country based on two things: their perception of risk and rewards and political stability, as well as their own strategies on location, sourcing of inputs and services, and technology transfer, among others. They will invest if they think the country has what it takes to handle the complexities of their global operations in the most cost-effective manner. And they would do so if they could divine the trajectory of local politics and are assured that they are not putting the lives of their executives in harm’s way.
Of course, much of those perceptions about the Philippines are just that—perceptions. But perceptions are important inputs in investment decisions and it would help the country a lot if those already doing business here are confident about the country’s prospects. That is why the recent BES report is a very important piece of information. Again, the government could complement this trend by committing to clean, credible and orderly elections in May. That’s the least the party in power now could do to improve investors’ perception of the Philippines as an investment destination. (Originally prepared as an editorial piece for the BusinessMirror, April 10, 2007)
Monday, April 09, 2007
American jobs data in March is good news to the Philippines
Americans were lately surprised to learn that the American economy, or at least the non-farm sector, has created an additional 180,000 jobs, a statistics that is supposedly beyond some analysts’ earlier expectations.
That’s good news to the Philippines as well. America accounts for about 17 percent of the Philippines’ merchandize exports. A buoyant American economy could translate to a rising Philippine exports, greater economic activities, and more jobs within our borders. The American economy has long been a major driver of global economic growth and progress. Should that trend continues, we will have a buoyant global economy for which we could anchor our hopes for higher and job-creating GDP. I’m crossing my fingers.
That’s good news to the Philippines as well. America accounts for about 17 percent of the Philippines’ merchandize exports. A buoyant American economy could translate to a rising Philippine exports, greater economic activities, and more jobs within our borders. The American economy has long been a major driver of global economic growth and progress. Should that trend continues, we will have a buoyant global economy for which we could anchor our hopes for higher and job-creating GDP. I’m crossing my fingers.
Sunday, April 08, 2007
Solving the "Mindanao problem"
IT is good to hear that the Japanese International Cooperation Agency (Jica) is preparing an “islandwide” development plan for Mindanao. The aim is supposedly to “narrow the gap between the Philippine baseline indicators and those areas affected by the decades-long conflict in Mindanao.”
That is good because for far too long, many provinces in Mindanao have been suffering from the absence of basic social infrastructure like drinking water, health and sanitation, education, good roads and bridges. If the supposed plan could really achieve its objective, it would make a lot of difference.
But if we are interested in long-term solutions to the “Mindanao problem,” Jica and the government should go beyond filling the gaps in economic indicators. It should move toward ensuring connectivity with the rest of the world. By connectivity here, we mean two things—physical and economic, as well as social.
By physical and economic connectivity, we mean the functional integration of Mindanao with the mainstream Philippine economy and the rest of the world. We often hear people from Mindanao complain of “imperial Manila” and policymakers based here in the metropolis simply view it with amusement. But these complaints about “internal colonialism” do have some historical and empirical basis.
If one stays long enough in Mindanao, one could easily notice that the cities or centers of economic activity on the island don’t seem to be linked functionally with each other.
For instance, there seems to be less economic interaction between General Santos and Davao City, or Davao City with Butuan, or Butuan with Cagayan de Oro or Cagayan de Oro with Zamboanga City.
Instead, these cities—all of them port cities—have ports where raw materials (rubber, gold, copper, tuna, seaweeds, pineapples, asparagus, timber, milkfish, rattan, among many others) are shipped away via Cebu toward Manila from which they are either processed or shipped to Japan, Europe and America. A classic colonial setup.
This problem arises from three factors. First, there are no world-class or decent road infrastructure between and among Mindanao cities and regions, thus discouraging intraregional trade and commerce. Second, road infrastructure within Mindanao cities and regions are themselves miserable, thus discouraging productivity. And third, government policy that tends to encourage monopoly and oligopoly in port operations and interisland shipping have been penalizing the Mindanao economy, thus preventing it from economically levelling up with the national economy.
The solution, therefore, is obvious: connectivity, connectivity, connectivity. The government actually tried to address it by coming with the Mindanao 2000 Framework Plan and had started implementing this earnestly with some funding from different donors like the United States Agency for International Development. Implementation of this plan, however, immediately bogged down when hostilities between government forces and the members of the Moro Islamic Liberation Front erupted. The firefights lasted for months, displacing more than a million “internally displaced persons” or refugees.
The government scrambled to rehabilitate the towns and provinces (specifically North Cotabato, Lanao del Sur, Lanao del Sur and Maguindanao) affected by these hostilities. But in 2003, the military’s efforts to take Buliok Complex (the new MILF headquarters after the fall of Camp Abubakar in 2000) again disrupted the fragile peace. All these events simply highlight the need for a social connectivity that should complement economic solutions.
By social connectivity here we mean the need to build what social scientist Robert Putnam calls “social capital” or that aspect of our sociopolitical lives that promotes trusts, reciprocity and social cohesion.
According to the World Bank, social capital refers “to the institutions, relationships, and norms that shape the quality and quantity of a society’s social interactions. Social capital is not just the sum of the institutions which underpin a society—it is the glue that holds them together.”
Building social capital should be done at two levels. First, there is a need to build greater trust and understanding across the different ethnicities in Mindanao. Obviously, the century-long conflict may have bred hatred and biases among groups, ethnicities and cultures. This problem can only be addressed through greater dialogue and tangible reforms, including what Jica is contemplating.
And second, there is also a need to build “vertical social capital” of the relationship between the Mindanao communities and cultures and the State. Somehow, the government may have to address the Mindanaoan’s perception of being neglected. Mindanao accounts for 40 percent of the country’s total food trade and yet receives a small share of the government budget.
About 60 percent of the country’s indigenous peoples are in Mindanao. Hence, any long-term solution should include an effective or credible implementation of the Indigenous People’s Rights Act that aims to restore indigenous people’s control over their ancestral domains. The government may really have to engage communities through participatory planning, ensuring that economic or infrastructure projects being implemented are not disruptive or have the risk of creating more displacement and alienation.
Doing all these things would require greater investments from both the government and the international community. But it’s an investment worth doing because planners could never isolate Mindanao from the larger context of development.
The Philippines has a very good human and natural resources, strategic location, and excellent telecommunications infrastructure. And yet we wonder why we are not getting all those investments that are flowing into the economies of our neighbors.
The reason here is Mindanao. Unless we come up with a long-term solution, the troubles that continuously brew and occasionally erupt on the island would always paint the entire Philippines as a politically unstable country. It’s so easy to dismiss this as a perception problem but it’s exactly this perception problem that weighs us down every time we attempt an economic takeoff.
The Jica project is great but we should broaden our ambition to include a long-term solution to the “Mindanao problem.” (Originally written as editorial for the BusinessMirror, April 5-7, 2007).
That is good because for far too long, many provinces in Mindanao have been suffering from the absence of basic social infrastructure like drinking water, health and sanitation, education, good roads and bridges. If the supposed plan could really achieve its objective, it would make a lot of difference.
But if we are interested in long-term solutions to the “Mindanao problem,” Jica and the government should go beyond filling the gaps in economic indicators. It should move toward ensuring connectivity with the rest of the world. By connectivity here, we mean two things—physical and economic, as well as social.
By physical and economic connectivity, we mean the functional integration of Mindanao with the mainstream Philippine economy and the rest of the world. We often hear people from Mindanao complain of “imperial Manila” and policymakers based here in the metropolis simply view it with amusement. But these complaints about “internal colonialism” do have some historical and empirical basis.
If one stays long enough in Mindanao, one could easily notice that the cities or centers of economic activity on the island don’t seem to be linked functionally with each other.
For instance, there seems to be less economic interaction between General Santos and Davao City, or Davao City with Butuan, or Butuan with Cagayan de Oro or Cagayan de Oro with Zamboanga City.
Instead, these cities—all of them port cities—have ports where raw materials (rubber, gold, copper, tuna, seaweeds, pineapples, asparagus, timber, milkfish, rattan, among many others) are shipped away via Cebu toward Manila from which they are either processed or shipped to Japan, Europe and America. A classic colonial setup.
This problem arises from three factors. First, there are no world-class or decent road infrastructure between and among Mindanao cities and regions, thus discouraging intraregional trade and commerce. Second, road infrastructure within Mindanao cities and regions are themselves miserable, thus discouraging productivity. And third, government policy that tends to encourage monopoly and oligopoly in port operations and interisland shipping have been penalizing the Mindanao economy, thus preventing it from economically levelling up with the national economy.
The solution, therefore, is obvious: connectivity, connectivity, connectivity. The government actually tried to address it by coming with the Mindanao 2000 Framework Plan and had started implementing this earnestly with some funding from different donors like the United States Agency for International Development. Implementation of this plan, however, immediately bogged down when hostilities between government forces and the members of the Moro Islamic Liberation Front erupted. The firefights lasted for months, displacing more than a million “internally displaced persons” or refugees.
The government scrambled to rehabilitate the towns and provinces (specifically North Cotabato, Lanao del Sur, Lanao del Sur and Maguindanao) affected by these hostilities. But in 2003, the military’s efforts to take Buliok Complex (the new MILF headquarters after the fall of Camp Abubakar in 2000) again disrupted the fragile peace. All these events simply highlight the need for a social connectivity that should complement economic solutions.
By social connectivity here we mean the need to build what social scientist Robert Putnam calls “social capital” or that aspect of our sociopolitical lives that promotes trusts, reciprocity and social cohesion.
According to the World Bank, social capital refers “to the institutions, relationships, and norms that shape the quality and quantity of a society’s social interactions. Social capital is not just the sum of the institutions which underpin a society—it is the glue that holds them together.”
Building social capital should be done at two levels. First, there is a need to build greater trust and understanding across the different ethnicities in Mindanao. Obviously, the century-long conflict may have bred hatred and biases among groups, ethnicities and cultures. This problem can only be addressed through greater dialogue and tangible reforms, including what Jica is contemplating.
And second, there is also a need to build “vertical social capital” of the relationship between the Mindanao communities and cultures and the State. Somehow, the government may have to address the Mindanaoan’s perception of being neglected. Mindanao accounts for 40 percent of the country’s total food trade and yet receives a small share of the government budget.
About 60 percent of the country’s indigenous peoples are in Mindanao. Hence, any long-term solution should include an effective or credible implementation of the Indigenous People’s Rights Act that aims to restore indigenous people’s control over their ancestral domains. The government may really have to engage communities through participatory planning, ensuring that economic or infrastructure projects being implemented are not disruptive or have the risk of creating more displacement and alienation.
Doing all these things would require greater investments from both the government and the international community. But it’s an investment worth doing because planners could never isolate Mindanao from the larger context of development.
The Philippines has a very good human and natural resources, strategic location, and excellent telecommunications infrastructure. And yet we wonder why we are not getting all those investments that are flowing into the economies of our neighbors.
The reason here is Mindanao. Unless we come up with a long-term solution, the troubles that continuously brew and occasionally erupt on the island would always paint the entire Philippines as a politically unstable country. It’s so easy to dismiss this as a perception problem but it’s exactly this perception problem that weighs us down every time we attempt an economic takeoff.
The Jica project is great but we should broaden our ambition to include a long-term solution to the “Mindanao problem.” (Originally written as editorial for the BusinessMirror, April 5-7, 2007).
Wednesday, April 04, 2007
McDonalds versus Jollibee: globalization is two-way street
The bellyachers in our midst often look at globalization as cultural invasion. It's understandable given the proliferation of Starbucks, McDonalds, Victoria's Secrets in our midst. Generally, Filipinos love Starbucks and McDonalds but some fear these foreign cultural icons are destroying local culture. Right?
Wrong. It’s because interactions among cultures are dynamic. It’s often a two-way street. Consider Joel Stein’s observations in Time online:
"The stuff you [the Americans] invented—in this culinary case, fast-food hamburgers, fried chicken, pizza and doughnuts—gets sent out into the world, is replicated by other countries and then comes back to you all crazied up, like a giant game of telephone. And if you hold that piece of Filipino fried chicken up to your ear and are really quiet, you can hear what the rest of the world thinks about us."
His observations about the entry of Jollibee in the US market smacks of a cultural shock:
"Jollibee, with more than 1,400 stores in the Philippines and 11 branches in California, makes McDonald's look like a funeral parlor. Its mascot is a jolly bee, and the restaurants are blindingly happy, all giant, shiny yellow blocks, as if they were designed by an architect from Legoland. Even if you gave Walt Disney all the ecstasy in the world, he would not have come up with this. America, according to Jollibee, is clearly a place of childlike optimism. Jollibee's two most popular items are called the Yumburger and the Chickenjoy. The Yumburger has a weird, plasticky dollop of French dressing in the middle. The crisped-up French fries are dry inside and taste as if they weren't just double fried but dunked in oil four or five times. The fried chicken is halfway decent, but the inflated, happy fakeness of Jollibee makes you feel that the only American its Filipino owners have ever seen is Pamela Anderson."
But overall Stein seems to look at the entry of “foreign American” fastfood in America in a positive light, something that goes beyond the culinary:
"All this foreign American food seems campy fun—bright, sweet, smiley and likable. Even in a world where so many hate and fear us, they still want to be like us. To them, it seems, we're a happy, efficient, fun bunch of guys, even if we act like total jerks when it suits us. They've figured it out: we're frat boys. And we like to eat like them."
Wrong. It’s because interactions among cultures are dynamic. It’s often a two-way street. Consider Joel Stein’s observations in Time online:
"The stuff you [the Americans] invented—in this culinary case, fast-food hamburgers, fried chicken, pizza and doughnuts—gets sent out into the world, is replicated by other countries and then comes back to you all crazied up, like a giant game of telephone. And if you hold that piece of Filipino fried chicken up to your ear and are really quiet, you can hear what the rest of the world thinks about us."
His observations about the entry of Jollibee in the US market smacks of a cultural shock:
"Jollibee, with more than 1,400 stores in the Philippines and 11 branches in California, makes McDonald's look like a funeral parlor. Its mascot is a jolly bee, and the restaurants are blindingly happy, all giant, shiny yellow blocks, as if they were designed by an architect from Legoland. Even if you gave Walt Disney all the ecstasy in the world, he would not have come up with this. America, according to Jollibee, is clearly a place of childlike optimism. Jollibee's two most popular items are called the Yumburger and the Chickenjoy. The Yumburger has a weird, plasticky dollop of French dressing in the middle. The crisped-up French fries are dry inside and taste as if they weren't just double fried but dunked in oil four or five times. The fried chicken is halfway decent, but the inflated, happy fakeness of Jollibee makes you feel that the only American its Filipino owners have ever seen is Pamela Anderson."
But overall Stein seems to look at the entry of “foreign American” fastfood in America in a positive light, something that goes beyond the culinary:
"All this foreign American food seems campy fun—bright, sweet, smiley and likable. Even in a world where so many hate and fear us, they still want to be like us. To them, it seems, we're a happy, efficient, fun bunch of guys, even if we act like total jerks when it suits us. They've figured it out: we're frat boys. And we like to eat like them."
Tuesday, April 03, 2007
The Philippines at a crossroads
THE Philippines is at the crossroads.
What will determine whether or not we are going to catch up with our fast-growing neighbors in the next decade would hinge much on how credible the mid-term election in May would be. That’s how important this political exercise is. If we bungle this one, it would be doubly hard to recover the respect that we have started to gain as a result of our initial success in global outsourcing and electronics exports.
We say we are at the crossroads because it seems that the Philippines actually has what it takes to move forward a little faster. The recent Grant Thornton survey seems to confirm that. It says that currently the Philippines is ranked No. 8 among 32 countries for having “super-growth companies,” a rare honor that we currently share with the United States, Armenia, Ireland, United Kingdom, South Africa, Sweden, Canada, Singapore and Germany. Super-growth companies are those which enjoy more than average growth both in terms of turnover and job creation.
Our current ranking is actually 15 notches above our previous ranking, an indicator that—despite a lot of stupid things happening around like that ridiculous Ducat hostage-taking that made us the laughing stock of the world, continuing failure of the government to invest in strategic economic and social infrastructure, and the lack of depth in the campaigns for the mid-term elections—the Philippines still has some strengths that it can put to work so the country could move forward.
And what are these strengths? The Grant Thorton survey doesn’t say much but it seems that the latest report by Jetro is the best gauge.
The country’s edge is not about labor cost, Jetro says, for the Philippines currently has among the highest wages in the Asia Pacific region. It’s not telecommunications, for we have among the highest charges in the Asia-Pacific neighborhood. It’s not power, for we remain among places with the most expensive electricity rates. And its not taxes, for our regressive system still has among the highest rates in similarly situated countries.
Having enumerated all these factors of production (negative against us), it’s fair to presume that the real plus factor lies with the Philippine human resource—its people, many of whom are going abroad to take difficult jobs, and its entrepreneurs.
The Grant Thornton report points to the continuing transition of the Philippine economy from manufacturing to services as one major factor that pushed us to the top 10 ranking, but it’s certain its really about having the best talents around. It’s the same reason why even the Japanese have been recently exploring the possibility of outsourcing some of its operations to the Philippines, a trend currently being done largely by American and European companies.
That’s good news; it means that the country could see a more diverse market for its cyberservices industry that has been growing more than 50 percent in the last five years.
Having made that optimistic note, it’s crucial to stress, though, that there’s only so much that this sector could do to move the economy forward. We are already seeing its limits in terms of not being able to generate jobs that could soak up the jobless off the streets.
Leaders in the cyberservices industry are saying that the industry is supposed to accumulate close to a million jobs (about 900,000) by 2010, but it appears that such target is getting difficult to achieve by the day. In 2007, the total employment in the cyberservices industry is probably close to 300,000 and it’s simply mission impossible to generate 600,000 more fresh jobs in the next three more years.
Of course, most of the cyberservices firms are trying to go up the value chain by engaging in knowledge process outsourcing. That’s one smart way of maximizing the country’s gains in outsourcing. But this option by itself is getting dicey with the raging war for talents globally. Because of the rapid expansion of the knowledge economy at a global scale, human-resource officers worldwide are increasingly looking at expatriates as a source of supply of skilled labor.
These days, it’s so easy for talent-search agencies to pirate local engineers, accountants, mathematicians, information technology experts, aircraft mechanics, pilots, and medical professionals, and send them to Dubai, Bahrain, Singapore, London, Bahamas, New York and Australia. In fact, the Thornton survey has identified this trend as a major concern.
Meanwhile, it seems other sources of growth are showing signs of weakening. Telecommunications has been enjoying frenetic growth but it seems the market is showing signs of saturation. Telecom companies are now putting their bets on third-generation technology to carry on the mantle for growth but it appears that the uptake remains slow and some people see a plateau effect in the horizon.
The point is that we need to complement these strengths if only to meet the modest 5-percent to 6-percent growth rate we have achieved in the last three years. We need more foreign direct investments at a scale that has been achieved by our neighbors in the region, say $3 to $5 billion a year, or three to five times the highest we’ve attained so far.
We need more activities in the farms, the construction sites and the factories to boost the economy. But how do we do that?
First, we need to achieve political stability in the next three years that should usher in an orderly 2010 presidential election. We can only do that by holding a really clean and credible mid-term election in May. Certainly, the ball is in the hands of President Arroyo. If she wants to leave a good legacy and a graceful exit, this is her last chance to do so by ensuring that she won’t use her immense power and machinery to rig the elections.
A clean and orderly mid-term election would mean that parties and factions are likely to contest the 2010 presidential derby sans the baggage and bitterness of Edsa Dos and Tres. That should usher in political stability that we badly need for a high and sustained growth. (Prepared as Editorial for BusinessMirror, 3 April 2007)
What will determine whether or not we are going to catch up with our fast-growing neighbors in the next decade would hinge much on how credible the mid-term election in May would be. That’s how important this political exercise is. If we bungle this one, it would be doubly hard to recover the respect that we have started to gain as a result of our initial success in global outsourcing and electronics exports.
We say we are at the crossroads because it seems that the Philippines actually has what it takes to move forward a little faster. The recent Grant Thornton survey seems to confirm that. It says that currently the Philippines is ranked No. 8 among 32 countries for having “super-growth companies,” a rare honor that we currently share with the United States, Armenia, Ireland, United Kingdom, South Africa, Sweden, Canada, Singapore and Germany. Super-growth companies are those which enjoy more than average growth both in terms of turnover and job creation.
Our current ranking is actually 15 notches above our previous ranking, an indicator that—despite a lot of stupid things happening around like that ridiculous Ducat hostage-taking that made us the laughing stock of the world, continuing failure of the government to invest in strategic economic and social infrastructure, and the lack of depth in the campaigns for the mid-term elections—the Philippines still has some strengths that it can put to work so the country could move forward.
And what are these strengths? The Grant Thorton survey doesn’t say much but it seems that the latest report by Jetro is the best gauge.
The country’s edge is not about labor cost, Jetro says, for the Philippines currently has among the highest wages in the Asia Pacific region. It’s not telecommunications, for we have among the highest charges in the Asia-Pacific neighborhood. It’s not power, for we remain among places with the most expensive electricity rates. And its not taxes, for our regressive system still has among the highest rates in similarly situated countries.
Having enumerated all these factors of production (negative against us), it’s fair to presume that the real plus factor lies with the Philippine human resource—its people, many of whom are going abroad to take difficult jobs, and its entrepreneurs.
The Grant Thornton report points to the continuing transition of the Philippine economy from manufacturing to services as one major factor that pushed us to the top 10 ranking, but it’s certain its really about having the best talents around. It’s the same reason why even the Japanese have been recently exploring the possibility of outsourcing some of its operations to the Philippines, a trend currently being done largely by American and European companies.
That’s good news; it means that the country could see a more diverse market for its cyberservices industry that has been growing more than 50 percent in the last five years.
Having made that optimistic note, it’s crucial to stress, though, that there’s only so much that this sector could do to move the economy forward. We are already seeing its limits in terms of not being able to generate jobs that could soak up the jobless off the streets.
Leaders in the cyberservices industry are saying that the industry is supposed to accumulate close to a million jobs (about 900,000) by 2010, but it appears that such target is getting difficult to achieve by the day. In 2007, the total employment in the cyberservices industry is probably close to 300,000 and it’s simply mission impossible to generate 600,000 more fresh jobs in the next three more years.
Of course, most of the cyberservices firms are trying to go up the value chain by engaging in knowledge process outsourcing. That’s one smart way of maximizing the country’s gains in outsourcing. But this option by itself is getting dicey with the raging war for talents globally. Because of the rapid expansion of the knowledge economy at a global scale, human-resource officers worldwide are increasingly looking at expatriates as a source of supply of skilled labor.
These days, it’s so easy for talent-search agencies to pirate local engineers, accountants, mathematicians, information technology experts, aircraft mechanics, pilots, and medical professionals, and send them to Dubai, Bahrain, Singapore, London, Bahamas, New York and Australia. In fact, the Thornton survey has identified this trend as a major concern.
Meanwhile, it seems other sources of growth are showing signs of weakening. Telecommunications has been enjoying frenetic growth but it seems the market is showing signs of saturation. Telecom companies are now putting their bets on third-generation technology to carry on the mantle for growth but it appears that the uptake remains slow and some people see a plateau effect in the horizon.
The point is that we need to complement these strengths if only to meet the modest 5-percent to 6-percent growth rate we have achieved in the last three years. We need more foreign direct investments at a scale that has been achieved by our neighbors in the region, say $3 to $5 billion a year, or three to five times the highest we’ve attained so far.
We need more activities in the farms, the construction sites and the factories to boost the economy. But how do we do that?
First, we need to achieve political stability in the next three years that should usher in an orderly 2010 presidential election. We can only do that by holding a really clean and credible mid-term election in May. Certainly, the ball is in the hands of President Arroyo. If she wants to leave a good legacy and a graceful exit, this is her last chance to do so by ensuring that she won’t use her immense power and machinery to rig the elections.
A clean and orderly mid-term election would mean that parties and factions are likely to contest the 2010 presidential derby sans the baggage and bitterness of Edsa Dos and Tres. That should usher in political stability that we badly need for a high and sustained growth. (Prepared as Editorial for BusinessMirror, 3 April 2007)
Monday, April 02, 2007
Rising anti-science attitude in the West?
With the rise of China and India, it’s fashionable among analysts to “predict” the downfall of the West (read America and Europe). But this “prediction” may actually come true if one takes Alvin Toffler’s recent observations in new book “Revolutionary Wealth.”
Among the waves of the future according to Toffler are biotechnology and genetic engineering but scientific efforts in the West towards these ends are being constrained by the growing anti-science attitudes in these countries. These anti-science attitudes, according to Toffler, are manifested in the shrill and sensationalistic media coverage of anti-GMO or anti-GE mass actions, the rise of “new wave” theories, and increasing clout of NGOs under the mantle of environmentalism. All these trends are happening against the backdrop of the declining enrolment in science and technology, engineering and mathematics, as well as the increasing reluctance of politicians to fund GE and biotech research.
Anti-GE groups usually invoke precautionary principle to oppose biotech, meaning that if there’s a perceived “risks” involve in new and emerging technologies, governments and companies should stop doing it. This is funny really and hypocritical. If we are supposed to ban technologies for having perceived risks, we might end up banning probably 99 percent of technologies in our midst. Cigarettes and cars are certainly harmful and confirmed killers but why is it that so-called environmentalists are not campaigning against them?
Of course, Asian countries like India and China are happy this development. These countries are aggressively spending billions of dollars in science and engineering, and are among the most enthusiastic adopters of GE and biotechnology. In fact, many of the breakthroughs in rice research in China are now being replicated in the Philippines.
While the West is increasingly becoming superstitious, Asia is embracing science and technology. I wouldn’t really be surprised one day if the world wakes up to find out that the center of excellence in science and technology has shifted to Asia, read China. In fact, research and development laboratories are spreading fast in the Asia-Pacific Region in what is now known as “innovation outsourcing”. The trend is largely caused by American hi-tech companies transferring to Asia to take advantage of the region’s superb and but cheap sci-tech talents. It would be safe to assume that restrictions put on research in the West are among the major factors that are driving them to Asia.
Hmm, globalization is happening in really surprising ways.
Among the waves of the future according to Toffler are biotechnology and genetic engineering but scientific efforts in the West towards these ends are being constrained by the growing anti-science attitudes in these countries. These anti-science attitudes, according to Toffler, are manifested in the shrill and sensationalistic media coverage of anti-GMO or anti-GE mass actions, the rise of “new wave” theories, and increasing clout of NGOs under the mantle of environmentalism. All these trends are happening against the backdrop of the declining enrolment in science and technology, engineering and mathematics, as well as the increasing reluctance of politicians to fund GE and biotech research.
Anti-GE groups usually invoke precautionary principle to oppose biotech, meaning that if there’s a perceived “risks” involve in new and emerging technologies, governments and companies should stop doing it. This is funny really and hypocritical. If we are supposed to ban technologies for having perceived risks, we might end up banning probably 99 percent of technologies in our midst. Cigarettes and cars are certainly harmful and confirmed killers but why is it that so-called environmentalists are not campaigning against them?
Of course, Asian countries like India and China are happy this development. These countries are aggressively spending billions of dollars in science and engineering, and are among the most enthusiastic adopters of GE and biotechnology. In fact, many of the breakthroughs in rice research in China are now being replicated in the Philippines.
While the West is increasingly becoming superstitious, Asia is embracing science and technology. I wouldn’t really be surprised one day if the world wakes up to find out that the center of excellence in science and technology has shifted to Asia, read China. In fact, research and development laboratories are spreading fast in the Asia-Pacific Region in what is now known as “innovation outsourcing”. The trend is largely caused by American hi-tech companies transferring to Asia to take advantage of the region’s superb and but cheap sci-tech talents. It would be safe to assume that restrictions put on research in the West are among the major factors that are driving them to Asia.
Hmm, globalization is happening in really surprising ways.
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