Tuesday, June 26, 2007

Globalization as a stabilizing force in Philippine politics

During the Hawaii phase of the Jefferson Fellowship, I got the chance to deliver a talk to the faculty and students of the Philippine Studies Center of the University of Hawaii in Honolulu (see photo). My major point? Globalization has become a stabilizing element in Philippine society—so far. Highlights below.

The Philippines is no longer the same place we knew ten years ago. In the last few years, the Philippine economy has been growing within the 5-6 percent GDP growth band, courtesy of robust services sector that has been growing at 6-7 percent. It seems to have overcome the boom and bust cycles that characterized much of the 80s and the 90s.

Why? Because of the emergence of new growth drivers, the most notable among them are the rising remittances from overseas Filipinos, recovering export sector particularly electronics and semiconductors, mining, agribusiness and cyberservices.

From coco chips to micro chips
Ten years ago, electronics and semiconductors accounted for only 42 percent of the country’s exports with farm-based products like coconuts, pineapples, bananas, tuna, seaweeds, and baskets having significant percentages. Today, manufactures account for 86 percent of the country’s exports, the bulk of which are electronics and semiconductors. Farm-based products now account for only 4 percent.

Ten years ago, 36 percent of our exports were purchased by the Americans, such that we would always a catch cold, nay influenza, when America sneezed. When combined with our exports to Japan, Netherlands, Hong Kong, Great Britain and Germany, more than 70 percent of our exports were purchased only by seven countries. China and India were not even listed among our markets.

Today, America only accounts for 18 percent of the country’s exports. China is now our third largest market next to Japan. Suddenly we can see our friends in the Asean buying about 17 percent of our products. The rest are accounted for by Europe and the rest of the world.

What we see here is a diversifying export market for Philippine products, a trend that should lessen our vulnerability to external shocks.

Outsourcing blooms
It used to be that after office hours, Ayala Avenue and the main thoroughfares of Ortigas Center are empty. People are home after their 8-5 routines. Now, going around these places after five you will see young people arriving. Work for them starts at 9 pm until the five in the morning. These young people are workers of call centers, a major component of the fast growing business process outsourcing industry that includes back office operations, medical transcription, software engineering, animation, among others.

The industry practically shot up like mushrooms in the last five years, growing at 57 percent per year on average. Today, the industry generates more than 3 billion dollars in service exports, employing more than 250,000 workers. At the rate it is growing, industry leaders project a 12 billion export revenues by 2010 with the total number of jobs reaching as high as 800,000 to a million workers.

The rapid growth of this industry has been so fast that Makati and Ortigas Center’s business centers are running out of office space. During the height of Asian financial crisis, vacancy rates in Metro Manila went as high as 50 percent; now it’s down to three percent, thus sending developers on a scramble to build more buildings. That is why property developers these days are expecting a property boom.

Overseas Filipinos
We seem to think of the OFW as a hardscrabble worker in some forgotten desert who can only afford low-cost and low quality dwelling. A few weeks ago, I was surprised to find out that almost 40 percent of the buyers of the high-end Manansala Tower condominiums situated right smack of Makati central business district are OFWs. By the local standards, prices in these prime locations—at least 100,000 pesos per square meter—is beyond the reach of ordinary office employees. But at the current exchange rate, that’s only about 300 dollars worth of monthly amortization for a nurse working in the US or UK. Overseas Filipinos are now major player in the local property market.

A significant number of these buyers are overseas Filipinos who left the Philippines in the 70s during Martial Law. Now they are in their 50s and 60s and are thinking of coming back home.

It would be easy for OFs these days, and even the emerging middle class, to buy properties these days because interest rates are low—as low as 3 percent. Banks are offering a fixed 11 percent rate for properties payable within 25 years. They are doing this lately because inflation rate is tapering off, and they were able to unload their bad assets due the SPV law that was passed a few years ago. With the SPV law, they were able to securitize those assets and disposed of them so easily.

Revolution from beyond
You might be wondering how these new growth drivers emerged. There are a lot of reasons but I would like to cite two major ones.

First—demographic change in advanced countries prompted rising demand for medical and other professionals and the Filipinos responded to this opportunity quite well. Also, high crude prices brought riches to oil and gas producing countries. They are recycling these petrodollars in exploration and development as well as construction of rigs and oil platforms and are hiring an increasing number of Filipino engineers, architects, geologists, mining engineers, and skilled construction workers. That explains the double digit growth of remittances each month in the last three years.

And the second—the Philippines has a relatively more open economy, courtesy of a major wave of economic reforms unleashed by the Edsa people power revolution, a process that was accelerated by World Trade Organization’s entry into force in 1995. Specifically, greater competition led to the modernization of the country’s telecommunications industries. When the Department of Trade and Industry started promoting the Philippines as an investment destination for BPOs in 2000, the country was prepared for the challenge.

The BPOs in the Philippines are part of the fast-growing global “new economy” that emerged in the 90s. The global recession that followed the dotcom bubble in 2000 may have discredited the “new-economy” prophets. Nevertheless, “new economy” remained current as global companies took to heart its core doctrine that companies should “focus on their core competencies” and outsource the rest using information technology.That’s how we came to have all these outsourcing companies in our midst. And their presence is expanding rapidly. Its new metamorphosis is the knowledge-process outsourcing (KPO) where local MBAs, engineers, and economists perform analytics like risk analysis for global corporations and organizations.

The electronics and semi-conductor industries of course have always been there since the days of the Marcos dictatorship. But the search by Japanese companies for skilled labor and lower cost areas in response to the appreciating yen since the early 90s brought a lot of them to the Philippines.

Somehow, I believe that these two factors qualify as examples of what journalist Thomas Friedman, author of the Lexus and the Olive Tree, calls “revolution from beyond,” and externally induced process of change that is affecting almost every facet of Philippine society, including politics.

Globalization as a stabilizing element
I could only cite two major impacts. First, based on some estimates, more than 60 percent of the country’s GDP are accounted for by the globalized sector of the economy whose imperatives are determined largely by global economic and political dynamics. Somehow, this has led to the “decoupling,” albeit partially, of the country’s growth prospects from the country’s rambunctious political dynamics.

The economy has been growing quite decently despite all the political noises. Critics of the government are finding it hard to mobilize warm bodies for mass actions. I guess the middle or the lower middle classes, the main actors of the Edsa I and II “revolutions” are benefiting from the opportunities generated by the new growth drivers.

Second, globalization has completely changed the references in political and social discourse thus making the old framework about what is “Left” and “Right” from which the great political debates were anchored has become less relevant.In the formulation of old, Leftists long for the “historical inevitability” of change in contrast with those of the Right who cling to the status quo. These days, however, the Left instinctively oppose market-oriented reforms aimed at undoing local monopolies and oligopolies, policies that should have immense welfare benefits to society. They long for the return of dirigiste policies of the past that nurtured the oligarchic structure of the Philippine economy. It’s so easy for Leftists these days to link arms with military “adventurists” and Marcos remnants for whatever issue they find convenient to oppose, thus lessening their credibility.

Class struggle within the country’s borders, the imagined schism between the owners of capital and the possessor of the brawn, has lost its immediacy as both workers and capitalists suddenly found themselves struggling for survival against foreign competition. Suddenly, “global competitiveness” became the buzzword requiring strategic alliances among the various social actors—politicians, business, workers, and civil society.

The current crop of politicians now generally assume the future of the country lies in global connectivity, and the only debate left is to what extent and how fast should we hitch on that global dynamics. These differences by themselves wouldn’t make interesting election discussions as politicians would rather go for mass marketing techniques characterized by hype and spectacle to get the votes.

In the campaigns, politicians sing and dance and the crowds are entertained. Yet it seems to be no big deal to many. That’s because the increasing globalization of the Philippine economy is making the mid-term elections a side show to what the people think are the “real issues.”

Based on the intensity of media coverage on the recent nursing board leak scandal that doomed the November 2006 batch of nursing graduates from practicing in the US was a bigger issue than the mid-term election. When Angelo de la Cruz, a construction worker captured by insurgents in Iraq and was shown on CNN pleading for his life a few years ago, the sympathy generated at the grassroots forced President Arroyo pull the few troops we had in Iraq, thus altering the country’s foreign policy overnight.

Several months ago, civil society organizations and the Catholic Church hierarchy expected a million people to show to its anti-charter change rally. Only about 20,000 came. During the height of Hello Garci controversy, many were expecting protest actions to gather momentum for another Edsa revolution. It didn’t happen. It seems there are more economic incentives for the “middle forces” to shun political action in favor of “stability” by which they could maximize the opportunities by the new growth drivers.

There are indications that most of those uprisings in the past were supported by the business elite. They are concentrated in the banking, real estate, export, and trading. Most of these sectors now are raking in money from overseas remittances, outsourcing, and recovering exports. It means they now have a stake in the stability of the system.

They are not apathetic—far from it. In fact, there’s a growing movement for a clean and honest elections. They just want to make sure that the political process should no longer take short cuts like the Edsa Dos and Tres that eventually hurt the overall prospects of the Philippine economy.
Certainly, globalization poses risks and challenges, but so far it has become a stabilizing force in Philippine politics. If the government could guarantee a credible election in May, the Philippines may yet achieve a higher growth trajectory (6-7 percent) in the next three years. That’s the only way the government could make serious headway in the fight against joblessness and poverty.

1 comment:

Anonymous said...

sir, i think this article will help me finish my research. Pde po bang makakuha ng copy? I'm a student of PUP...