[OPINION] Agribusiness

By Henry J. Schumacher | 

During the Arangkada Forum on September 14, there was much focus on sectors with substantial growth potential—including agriculture, creative industries, information and communications technology, manufacturing, mining, logistics and tourism.

Although the Philippines is becoming a majority urbanized country at a fast rate, close to half of its citizens still live in rural areas. Significantly from the vantage of development and inclusive growth, 73 percent of the poor are rural residents. Over 12 million Filipinos, close to one-third of the total work force, rely on agriculture for their livelihood.

Despite its size and importance to the economy, the overall agriculture sector contributed less than 10 percent to GDP in 2016; the last year in which it produced more than 20 percent of GDP was 1969.

Among the main challenges to agriculture growth:  (1) ability to utilize overseas market access; (2) poor logistics and supply chain; (3) poor access to finance; (4) inadequate crop insurance; (5) land market inefficiencies; and (6) poor extension services.

Philippine agricultural exports are the lowest of the Asean-6 and below 5 percent of the total from the region. A country, such as Vietnam—with a population size close to the Philippines but with less land available for agriculture—exports four times that of the Philippines. Exports of agricultural goods from the Philippines were $6.9 billion in 2014, while imports were $8.7 billion. Vietnam—at $26 billion—has become a leading exporter of rice, coffee, fish, fruits and nuts. Top actual and potential Philippine exports include banana, cacao, coconut products, coffee, mango, marine products, pineapple and sugar.

Quite a number of recommendations were made at the Arangkada Forum to drive agribusiness (I selected a few):

  1. There is a need to review government programs that distort market competition for land and that potentially affect small farmers’ access to credit and preclude their ability to benefit from economies of scale;
  2. Create an irrigation master plan to set the direction for irrigation development;
  3. New agriculture, forestry and fisheries enterprises should be developed, while existing ones will be encouraged to increase production and to go beyond producing merely raw materials through increased value adding of products with higher market value.
  4. Facilitate the use of appropriate farm and fishery machinery and equipment;
  5. Strengthen the extension system through the engagement of a pool of professional extension workers that will provide technical and business advisory services;
  6. Diversify into commodities with high value adding and market potential. Commodities that can be developed based on vulnerability, suitability, and value-chain analyses of the Department of Agriculture (DA) include mango for coffee, dairy cattle, abaca, rubber, banana and cacao;
  7. Expand agribusiness enterprises through new and innovative production and marketing schemes. New forms of linkages, such as contract farming and corporate farming, that will connect farms to markets and other upstream services should be established;
  8. Farm-to-market roads, bridges, and railways should be constructed to connect small farmers to the agricultural value chain. Interisland water transport (e.g., roll-on roll-off nautical highway);
  9. Raise investments in research and development for production and postharvest technologies;
  10. Pursue bold initiatives on crop insurance that reaches a large swath of an underserved market segment;
  11. Improve market information, technology transfer, marketing, export promotion and broader trade facilitation measures.
  12. Give priority to high-value, export-winner crops, such as avocado, banana, cacao, coffee, mango, marine products, mongo beans, peanuts, pineapple, red hot chilli, squash and tobacco.
  13. Integrate small farmers into larger enterprises, such as cooperatives; and
  14. Improve agricultural support infrastructure and services, such as farm-to-market roads, cold storage and irrigation, to facilitate the distribution of agricultural products and increase farmer income.

In other words, we need to deliver support services to farmers and fishermen, such as financing, incentives, technology, irrigation, postharvest facilities, farm-to-market roads, improved logistics and integration in the supply chain to fully develop the potential of the agricultural industry to develop rural areas and the countryside.

What would justify a heavy budget allocation for agricultural productivity and profit? There will be more investments in agriculture, farmers will get easier access to finance, there will be lower unemployment  and supply/value chains will be created. As a consequence, some 20 million rural Filipinos can be lifted out of poverty. And the children of farmers will stop moving from rural areas to urban centers, or become overseas Filipino workers. Isn’t this what the 10-point socioeconomic agenda of the Duterte administration had in mind? Fighting poverty in agriculture? If the DA budget allocation is properly implemented, millions can be given dignified lives.

Source: https://businessmirror.com.ph/agribusiness/

PH economy remains on track for expansion, says Tetangco

Published By Lee C. Chipongian
 

The Philippines looked set to becoming an upper middle-income economy by the end of the Duterte administration, according to former central bank governor Amando M. Tetangco Jr.

Amando M. Tetangco Jr.

MB File- Amando M. Tetangco Jr.

“With a reform-oriented government and a collaborative private sector, achieving the Philippines’ goal of becoming an upper middle-income economy by 2022 is indeed highly feasible,” said Tetangco in a speech before members of the Joint Foreign Chambers of Commerce (JFC). The group awarded him the Arangkada Philippines Lifetime Achievement during a forum last week.

Tetangco, who stepped down as a two-term governor of the Bangko Sentral ng Pilipinas (BSP) last July, continues to see the country’s “strong macroeconomic fundamentals, sound economic management, solid domestic demand and a young and vibrant workforce.”

“The Philippines is touted to become Asia’s next economic powerhouse,” said Tetangco, citing the World Bank’s June 2017 Global Economic Prospects projects that the Philippines “will be in the top 10 fastest growing economies in the world with a GDP growth forecast of 6.8 percent.”

Arangkada Philippines Forum has its own “Implementing the 10-point Agenda” proposals and Tetangco thanked the group for its “valuable partnership and inputs (and) its constructive criticisms.”

Tetangco said it is important to this agenda to enhance the competitiveness of the business environment, to fast-track economic growth and for inclusive growth. Tetangco pointed out that this was achievable and listed the factors that would continue to support growth such the country’s “low and stable” inflation, the well-capitalized and liquid banking system that he said “continues to intermediate funds to the productive sectors of the economy” and “poverty incidence that continues to decline over the years.”

“The BSP has helped cultivate this positive alignment of macroeconomic indicators through calibrated monetary policy, aided by enhanced surveillance and an expanded tool kit; responsive banking regulations, aligned with international standards but recognizing relevant domestic conditions; and market determined external policy, including the liberalization of foreign exchange regulations,” he said. The JFC Arangkada Lifetime Achievement Award is for individuals – not strictly Filipinos – who have “contributed significantly to improving the country’s business environment.”

“Mr. Tetangco was chosen by the JFC for
accomplishments as BSP governor that were very
important to the foreign investment community,” a statement from the group said. Past awardees include former President Fidel V. Ramos, former PEZA director general Lilia de Lima, SGV founder Washington Sycip, and former foreign affairs secretary Roberto Romulo.

Source: http://business.mb.com.ph/2017/09/23/ph-economy-remains-on-track-for-expansion-says-tetangco/

[OPINION] Improving the investment climate

By:  – @inquirerdotnet  |  / 05:08 AM September 23, 2017

 

The National Competitiveness Council has been tracking the Philippines’ progress across various global indices since 2010, and by most indicators it has gone up the rankings over this period. It’s a remarkable achievement for the country, which has struggled to improve the relative attractiveness of its business environment to international investors. But despite these improvements, it would be premature to pronounce Philippine competitiveness a success. As we discussed in the recent Arangkada business forum, there is still a lot of room for the country to introduce reforms and institutionalize the practices behind our improvements.

The Joint Foreign Chambers (JFC), in a daylong forum dubbed “Arangkada: Implementing the Ten-Point Agenda,” gathered an audience of stakeholders to discuss the specific areas for reform and the potential measures that could be undertaken by the government. The conference provided insights on how the investor community views the Philippine market and how the government intends to address some of the investor concerns. The Arangkada publication has several recommendations. Here are the first three:

The Philippines should continue aggressive efforts to improve its rankings. The government and the private sector should select areas of competitiveness which are the most important to investors and where the Philippines can move up the most and the fastest, and focus resources on improving these.

The Philippines should equal or exceed Indonesia and Vietnam in the next few years and Thailand in the medium term in terms of rankings in major global competitiveness indices.

A review of potentially anticompetitive legislation and policies that may substantially prevent, restrict, or lessen competition is in order.

One specific area is the foreign investment negative list. The government is currently reviewing the list, which was last updated in 2015. The list outlines the sectors where the government has decided to exclude foreign participation. But under this administration, officials have spoken of ensuring the highest possible easing of foreign restrictions to date.

The commitment to ease restrictions is a positive development. However, the list itself is only one part of the broader restrictions that the Philippines has imposed on foreign participation. Foreigners hoping to invest in some sectors, like the practice of some professions or the media, will still have to wait for legislation or even constitutional amendments before they can participate. Even then, fostering a good business environment goes beyond liberalizing the economy on paper. A more attractive economy will be the result of several factors, including a stable macroeconomic environment, adequate infrastructure, lessened red tape, and low incidences of crime and corruption.

Unlike his predecessor, who convened the Legislative-Executive Advisory Council only twice during his term, President Duterte has decided to convene it regularly. This ensures better coordination among the leaders of the government branches to discuss the legislation needed to achieve the administration’s socioeconomic agenda. So far, the council is prioritizing these proposed pieces of legislation: the Ease of Doing Business Act to cut red tape, the Rightsizing the National Government Act to streamline the bureaucracy, Comprehensive Tax Reform, the National Transport Act to address the transport crisis, and the amendment to the Public Services Act to liberalize the telecommunications, transport and power industries.

Alongside these legislative measures, the government should incorporate automation into its processes. For example, it could use automation to streamline the business permitting and licensing system, cut bottlenecks in land titling, and interconnect various agencies. These measures would reduce opportunities for corruption.

Foreign investments have been increasing in the last few years. Last June it surged by 182.7 percent—a vote of confidence in the country’s prospects. We cannot lose this momentum. Economies worldwide are also increasing in competitiveness. We must work doubly hard lest we get left behind.

Source: http://opinion.inquirer.net/107343/improving-investment-climate

Tetangco receives lifetime achievement award from JFC

By Richmond Mercurio (The Philippine Star) 

Joint Foreign Chambers of the Philippines presidents with past and present Arangkada Lifetime Achievement Awardees during the recently concluded sixth anniversary of Arangkada Philippines Forum at the Marriott Grand Ballroom. In photo, from left, are Ho-Ik Lee (KCCI), Bruce Winton (AmCham), Julian Payne (CanCham), 2014 Arangkada Lifetime Achievement Awardee former PEZA director general Lilia de Lima, PAMURI chairman Shameem Quraeshi, Tom Grealy (ANZCham), 2017 Arangkada Lifetime Achievement Awardee former BSP governor Amando Tetangco Jr., Hiroshi Shiraishi (JCCIPI), 2015 Arangkada Lifetime Achievement Awardee SGV founder Washington Sycip, AmCham executive director Ebb Hinchliffe, Evelyn Ng (PAMURI), Arangkada chief-of-party John Forbes, and JCCPI vice-president Nobuo Fujii.

MANILA, Philippines — Former Bangko Sentral ng Pilipinas (BSP) governor Amando Tetangco Jr. has been awarded the Arangkada Philippines Lifetime Achievement award by the Joint Foreign Chambers (JFC) of the Philippines.

The Arangkada Lifetime Achievement Award recognizes individuals of any nationality that have lived and worked in the Philippines for 25 years and have contributed significantly to improving the country’s business environment.

JFC said Tetangco was chosen as this year’s recipient given his accomplishments as central bank governor which played an important role to the foreign investment community.

Among these accomplishments include managing inflation, the exchange rate, and the debt burden highly effectively, achieving record levels of reserves exceeding $80 billion, making reforms to increase the foreign banking presence in the Philippines, raising confidence of rating agencies to give investment grade ratings, and emphasizing financial inclusion and financial education for young people, among others.

“Being BSP governor is a role that had many challenges but one that I will always cherish. I feel very honored and also humbled to have been given the opportunity to serve in that capacity,” Tetangco said.

“Now that my term at the BSP has ended, I look forward to the work exemplified by private sector organizations like the JFC that proves public service is not a monopoly of the government.

The private sector has a tremendous role to play in improving people’s lives. I will constantly bear this lesson in mind as I move on to this new chapter of my life as a private citizen,” he added.

Source: http://www.philstar.com:8080/business/2017/09/22/1741357/tetangco-receives-lifetime-achievement-award-jfc

Commentary: Enhancing human capital in the 10-point agenda

 
 

What do we need to advance this country over the long term?

As we espouse in the Stratbase ADR Institute, the administration needs to take a strategic perspective in governing—a perspective that balances short-term needs with long-term requirements, and that looks at ways in which the different gears of the economy function together. In advocating this holistic view, we are happy to work with and participate in the initiatives of other civil society and business actors that are doing their part to encourage the government to take big steps forward across society.
 
The recently held Arangkada forum, hosted by the Joint Foreign Chambers, is one such initiative.
 
In other columns, we have looked at the importance of injecting dynamism into the investment environment and of monitoring the plans for the nationwide infrastructure drive called Build, Build, Build.
 
In this article, we focus less on ‘big-ticket’ works that, if implemented, could have an outsize impact on the economy, and more on shoring up key sectors that are fundamental to the future wellbeing of this economy. One good example is the education sector and the Philippines’ human capital. 

Preparing the Labor Force

With technological advancements, new jobs are created at a faster pace than before. By some estimates, around 65 percent of children who enter primary school today will end up working in jobs that still do not exist—even jobs that we have not even imagined.
 
To come to terms with this reality, we have to break down some of the walls that make us think that high-technology careers are niceties for the future, instead of a certainty that we should be managing even in the present. This reality means that we should already be equipping our children with technology skills that will help them to compete in the future marketplace—and, in doing so, we will help to avoid some of the potentially adverse effects of disruptive technologies.
 
The World Economic Forum’s 2017 Human Capital Report puts the Philippines in the 50th place out of 130 countries. The report revealed that the Philippines fared poorly in ‘deployment’, an indicator that covers people’s accumulation and application of skills in the workplace.
 
In the same vein, the Labor Force Survey shows that while unemployment and underemployment are slowly improving, they still remain high. In particular, underemployment, at 16.3 percent in July, reveals that people are seeking more work and better jobs.
 
However, several business groups have complained about the lack of skilled labor, again highlighting the disconnect between labor’s demand and supply. This only further shows the urgency of adapting the way that we train and capacitate our workforce.
 
During Arangkada’s panel discussion on Human Capital, a representative from the IT sector shared that to remedy the skills mismatch, several IT companies have taken the initiative to build relationships with the academe, providing teaching-training and helping design the curriculum to fit industry needs.
 
This should be a welcome move for students and their families, who will have a better shot at getting and excelling in good jobs after they graduate. This move could be extended to other sectors as well, as our industrialists can take proactive steps to ensure the next generation is ready to take on technical roles.
 
Beyond the technical side, however, it should go without saying that soft skills continue to be crucial. Some of these skills, like adaptability, will be especially important for an information-charged world. Others, like integrity and good interpersonal communication, continue to be prized for keeping organizations—whether government agencies or businesses—running smoothly. 

Arangkada recommendations for education

An Arangkada publication, distributed during the forum, outlines the group’s list of recommendations for the government’s attention. There are several recommendations, many of which are already present in some of the government’s planning documents. In support of further improvements to the education sector, here are nine recommendations (taken directly from Arangkada) that have not yet been integrated into the government’s plans:
  • Commit to an increasing public education budget of 4% of GDP. Double the average spending per studied (from 2010) to be closer to other ASEAN economies.
  • Narrow the skill-jobs mismatch by revising curricula and training and retraining the workforce for hard-to-fill jobs of the present and future economy. Support greater interaction between TESDA and the private sector.
  • Empower teachers by constantly improving their quality and curriculum to help students acquire the knowledge and skills required to enable them to get higher quality jobs. Apply competency based-standards for teachers and provide more in-service training, while maintaining their welfare and morale
  • Basic education and college curricula should increase study of science, technology, and math subjects
  • Encourage more college students to study fields needed for specialized positions (e.g. agribusiness, computer science, engineering, environmental science, mining, and physics). Tech more foreign languages in colleges to support the BPO and tourism sectors
  • Intensify investment in technology for public education. Complete the connection of some 7,000 high schools to the internet. Equip high school teachers with notebook computers and students with e-readers. Place internet-connected computer labs in elementary schools
  • Resolve administrative barriers (importation fees) to the donation of used computers by PEZA locators to the education sector. Hundreds of thousands of units could be given to help students learn essential computer skills
  • Change laws and rules to allow qualified foreign schools to operate and foreigners to teach in the Philippines.
  • Strengthen the Dual Education/Dual Technical System by expanding scholarships and involving the private sector in the curriculum development and internships.

Final thoughts

The Arangkada forum tackled many other issues, including industrialization, logistics, and agribusiness. If we had to choose a universal theme from the conference, however, it was the importance of forging partnerships and strengthening communication across different stakeholders, including the academe, the public sector, and the private sector, to bridge existing gaps and identify areas for reforms and cooperation.
 

Source: http://www.philstar.com/news-feature/2017/09/20/1740965/commentary-enhancing-human-capital-10-point-agenda

[OPINION] The investment and infrastructure challenges in implementing the 10-Point Agenda

Thinking Beyond Politics by Victor C. Manhit | September 20, 2017

In the medium term, the government is aiming to reach an annual GDP growth of between 7% and 8%. These rates are higher than we’ve seen in recent years, but our officials are optimistic. At the sidelines of the recent Arangkada business forum, Socioeconomic Planning Secretary Ernesto Pernia assured us that these rates are achievable, particularly when the current restrictions on foreign investments are lifted. While listening to the presentations, it seemed as though all our economic officials are similarly bullish for what they can accomplish.

NEW DYNAMISM IN THE INVESTMENT ENVIRONMENT?
At present, the government is reviewing the foreign investment negative list (FINL), which is the official list of sectors where foreign participation in excluded. Revised every two years, this round is the first time that the administration will have a hand in deciding where foreign investment is welcome.

By all accounts, this government is taking a more liberal approach than its predecessors.

At a different event, Secretary Pernia even shared that he had sent the initial draft of the 11th FINL back to the drawing board — deeming the first round of proposed changes too “puny.” This aggressive push is more than welcome for our economy, and Secretary Pernia’s statements are certainly an encouraging development.

The new list is expected to be released sometime in the next quarter, as the next draft will still have to be presented to the NEDA board for approval. According to Secretary Pernia, the sectors that he aims to open for foreign inclusion are: retail trade, professions, public utilities, and contractors. Some of these sectors are also expected to liberalize in line with the rest of the region as part of the ASEAN Economic Community.

As important as it is, liberalizing the investment environment is only one step to attracting more investment in the country. Deeper reforms are needed if we are to propel our economy to greater heights. Which reforms are necessary to improve our country’s competitiveness and foster an even more dynamic investment climate? These were the questions tackled during a recently held forum organized by the Joint Foreign Chambers, called “Arangkada Philippines: Implementing the 10-Point Agenda.”

Arangkada is a Tagalog word that translates to “accelerate,” a term that aptly captures the pace of our economy’s expansion over the last few years. While the previous administration made significant strides in fueling our economy, it fell short in achieving some of its growth and development targets. President Duterte and his team are capitalizing on these shortcomings.

Even before Duterte gave his oath of office, his economic team had already laid out its 10-point socioeconomic agenda. The speed with which it had declared its objectives reflected the administration’s obvious commitment to bringing about swift and impactful reforms — reforms that have to be implemented if we are to turn our ambitious targets into reality.

For those who were not able to make it, the Joint Chambers have published their lists of recommendations, covering macro-economic reforms, competition, infrastructure, rural development, human capital, poverty alleviation, and science, technology and the arts, in the conference proceedings.

BRIDGING THE INFRASTRUCTURE GAP?
The decrepit state of the country’s infrastructure is often cited as the Achilles heel of our economic potential. Thankfully, with the launch of the Build, Build, Build campaign earlier this year, there is no discounting that infrastructure is a centerpiece project of our current leadership. As a result, there has been renewed interest in the infrastructure sector and in how the administration will accomplish its targets.

For its part, the Duterte administration has announced a list of priority infrastructure projects.

During the forum, it was encouraging to listen to our government officials talking about the big-ticket projects that they intend to break ground on or even complete during this term. These projects include the Japan-funded Mega Manila Subway and 13 bridges across the Pasig River, two of which will be built with Chinese grants. Given the state of our traffic situation today in Manila, all of these projects will be watched and waited for with great anticipation.

Yet, several of these projects are reboots from the previous administration — a sobering reminder that they had failed to advance despite years of gestation. As always, the devil is in the execution, not the planning.

While the government has promised to increase infrastructure spending, this should also be complemented with institutional and policy reforms. The approval of the National Transport Policy this year is a good step towards unifying all transport projects. The administration’s push to right-size the bureaucracy is also a welcome measure to address the fragmented institutional setup of various transport agencies. Over the long term, a mechanism should be in place to ensure policy continuity every time a new administration steps into office.

FISCAL SPACE
With great anticipation also comes great apprehension about whether the Duterte administration will be able to see its commitments through to the end and achieve them as planned. Thankfully, it has everything going for it: years of sound fiscal policy have afforded the government a wide-enough fiscal space to make these necessary investments. It would be a waste to let the best opportunity that we have had in decades slip between our fingers.

Source: http://bworldonline.com/investment-infrastructure-challenges-implementing-10-point-agenda/

Infra projects lack skilled workers

By Richmond Mercurio (The Philippine Star) 

MANILA, Philippines — Businessmen are worried that the country’s “golden age of infrastructure” may lose its luster given the shortage in skilled labor in the construction sector.

For both local and foreign businessmen, the realization of the government’s ambitious “Build Build Build” program may take a hit, if such skilled labor supply tightness continues.

“If the economy grows, we do not have enough qualified people. Even the infrastructure, if you talk about it, there’s a shortage in construction workers, welders, and others,” Philippine Chamber of Commerce and Industry president George Barcelon said.

“We do already see the severe shortage in skilled labor. You find enough unskilled labor, but you find severe shortage in skilled labor. If we want to see just half the projects through that are in the pipeline, we cannot cover that with local talents alone because we need more people that understands the industry and will make it better,” European Chamber of Commerce of the Philippines (ECCP) president Guenter Taus said separately.

Real estate consultancy services firm Colliers International Philippines said the lack of skilled workers in the country is already causing construction delays in the private sector.

The Duterte administration is ushering in what is touted as the golden age of infrastructure through an aggressive infrastructure spending program.

Dubbed Build Build Build, the government will spend a total of P8.4 trillion or approximately $160 billion for infrastructure in the next six years.

For 2017 alone, the government allocated 5.4 percent of gross domestic product for infrastructure spending.

“If we want to grow at the rate that is forecasted, we need to look at sources of foreign employment in various sectors,” Taus said.

The ECCP has long been lamenting restrictions on international contractors in the country.

At present, foreign contractors in the construction industry operating in the Philippines can only hold 40 percent equity in businesses.

This, according to businessmen, makes foreign investors reluctant to bring in technology and capital into the country.

“Opening up of the construction industry serves many purposes. One, it provides you with the labor you may not have enough of. Second, it provides you with transfer of technology in some fields. And third, it also provides you with competition, it basically keeps costs down,” Canadian Chamber of Commerce of the Philippines president Julian Payne said.

Source: http://www.philstar.com/business/2017/09/18/1740032/infra-projects-lack-skilled-workers

Spend, spend, spend

Corporate Watch by Amelia H.C. Ylagan | September 18, 2017

Diokno
Budget Secretary Benjamin Diokno reveals the means on how the government can source funds for the different infrastructure projects under the “Build! Build! Build!” program during the DuterteNomics Forum at Conrad Manila in Pasay City on April 18, 2017. Also in the photo are Presidential Spokesperson Ernesto Abella, Transportation Secretary Arthur Tugade, and Executive Secretary Salvador Medialdea. — PRESIDENTIAL COMMUNICATIONS

Budget Secretary Benjamin Diokno and National Economic Development Authority (NEDA) Secretary Ernesto Pernia keynoted the Arangkada 2017 Forum on Sept. 14, when the Joint Foreign Chambers of Commerce and Filipino partners in business listened to economic opportunities in the near-, medium- and long-term.

“The Duterte administration will be different. We envision that by the time we step down in 2022, we would have ushered in the Golden Age of Infrastructure in the Philippines, an era that Filipinos will look back with affection as one that laid the necessary foundations for robust and equitable growth in the long-term,” Diokno said.

Sec. Diokno lamented the opportunities lost in the less than 2% of GDP of infrastructure spending from 1986 to 2016, which he said “reflected decades of neglect and misallocation of public resources.” He noted that “the suggested ratio for infrastructure spending as a share of GDP is 5% for developing countries.” Loud and clear, the “Build, build, build” program will reverse previous alleged “inaction” to high-gear “Spend, spend, spend” to stimulate economic development.

Sec. Pernia acknowledged past administrations’ accomplishments: “GDP growth has been on a sharp monotonic uptrend over the last three and a half decades. With a 6.9% GDP growth in 2016 — high end of the government’s target of 6% to 7% — the Philippines is poised to be one of the fastest rising economies in Asia over the medium-term.” Regarding the relative slowdown in the first two quarters of 2017 under Duterte, Pernia pointed out that this phenomenon seems normal, reflecting post-election-year effect on growth.

“The economy is also undergoing structural transformation — growth is increasingly being driven by investments vis-à-vis consumption, and is led by the industry sector relative to the service sector. In other words, sources of economic growth have broadened. Total factor productivity growth of the economy in recent years has been the fastest among ASEAN-6 countries at 3.3% for the period 2010-2014, and the highest in the group at 1.48% over the period 2010-2016” Pernia objectively said of the economic situation prior to “Dutertenomics.”

Pernia is confident that the economy is robust and sustainable, but he laments the inequality across households and regions, and the chronic poverty that persists amidst the glowing GDP numbers. “The country’s GDP remains concentrated in the Mega Urban-Industrial Region comprising the National Capital Region (Metro Manila), Calabarzon (Region 4A), and the Central Luzon Region (Region 3), which collectively accounted for nearly two-thirds of total GDP for the period. But the per capita income of NCR is almost triple the national average of P78,712 for 2016, while ARMM’s per capita income is now only 1/4 of the national average and 1/13th of NCR’s,” Pernia said.

“This is why we have identified infrastructure development as a priority of the Duterte administration,” Diokno emphasized. “We have to close the infrastructure gap soon if we are to realize our development objectives of becoming an upper-middle income economy by 2022 and reducing poverty rate to 14%. DBM is targeting at least 5% of GDP for infrastructure financing in the medium term; 5.4% for 2017; and 6.3% for 2018. In nominal terms, these figures translate to P858 billion and P1.1 trillion for FY 2017 and 2018, respectively.”

Diokno plans to finance this through an expansionary fiscal policy that first, increases the planned deficit from 2% to 3% of GDP. Second are the assumed increased revenues from the Tax Reform program. Combining the two expansionary measures, the government would generate an additional fiscal space amounting to P309 billion in 2018 and rising up to P524 billion in 2022, Diokno assumes.

But what if Diokno’s assumptions on revenue inflows do not actually happen? Would the brave swing to “Spend, spend, spend” from past “inaction” dent the “monotonic (boring?) uptrend of GDP” — the close to 7% GDP growth — acknowledged by Pernia?

The government will have to borrow more, that’s what it means.

Hopefully, the shortfall from unrealized revenues will not drive up long-term debt for future generations to pay for — we are still paying, until 2025, for the debts in Marcos’s martial law: “During the Marcos regime… many ‘successes’ were built on ‘debt-driven growth.’ While it is true that the regime embarked on an infrastructure spending spree, this was pursued largely to justify its existence and at the exorbitant cost of the ballooning of the country’s external debt (Rappler, 03.25.2016).”

And the spending of Marcos did not translate to higher GDP growth for him to brag about. “The economic setback due to the Marcos regime cemented our title as the ‘sick man of Asia’ for the good part of the past 3 decades, and prevented us from partaking of the so-called ‘East Asian miracle’ where by the time we recovered in 2003 the incomes of our neighbors had grown 2-4 times their 1982 levels (Ibid.).”

Many economists have warned that increased government spending does not necessarily stimulate GDP growth, and that the Keynesian recipe of “Spend, Spend, spend” (originally for the post-war economic rehabilitation) has lost flavor in the recent unpredictable, anti-cyclical booms and busts of financial and economic crises. Some even say that increased government spending can hamper economic growth, for the “crowding out” of the private sector, and for the politics that murk the decision factors for government intervention in economic planning.

Professor Emeritus of Law at George Mason University Gordon Tullock suggests that politicians and bureaucrats try to gain control of as much of the economy as possible. Demand for government resources by the private sector leads to misallocation of resources through “rent seeking” — the process by which industries and individuals lobby the government for money. Rather than spend money where it is most needed, legislators instead allocate money to favored groups. Though this may yield a high political return for incumbents seeking reelection, this process does not favor economic growth (mercatus.org, 06.10.2010).

A note to our present leaders and economic planners: Yes, we need roads and bridges, and other infrastructure. But when and if you decide to (over)spend on the “Build, build, build” hybrid PPP program, please be careful to study recent abundant analyses on the advantages and disadvantages of government spending as a stimulus to that much-desired GDP growth figure — make sure there is something to brag about in the end, as our economic history writes itself.

Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.

Source: http://bworldonline.com/spend-spend-spend/

At least $10 B yearly FDI possible with reforms — JFC

By Richmond Mercurio (The Philippine Star) 

MANILA, Philippines —  The Philippines can easily attract at least $10 billion in foreign direct investments (FDI) annually once existing restrictions and improvement on its overall competitiveness are addressed, the Joint Foreign Chambers (JFC) of the Philippines said.

JFC officials said yesterday while the country may be considered the “rock star of Southeast Asia” as far as economic expansion is concerned, it remains a laggard in terms of FDI due to several factors affecting its business environment.

“The Philippines should receive $10 billion a year. But what is preventing the country’s economy from running on all cylinders? Growth of business processing, manufacturing, and tourism have been high, but the growth of agriculture has been weak and mining has moved backward despite its high potential,” Japanese Chamber of Commerce and Industry of the Philippines president Hiroshi Shiraishi said.

“The really relevant criteria is how we are doing compared with our leading ASEAN neighbors such as Vietnam, Thailand and so on. Our target should be to have at least the ASEAN average in FDI. And we still have a long way to go,” Canadian Chamber of Commerce of the Philippines president Julian Payne said separately.

The country’s net FDI last year zoomed 40 percent to a new record level of $7.9 billion, surpassing the full-year target of $6.7 billion.

“The key point is how quickly the new administration can proceed with its stated intention to remove restrictions of FDIs. There have already been a number of initiatives,” Payne said.

In a new Arangkada Project publication released yesterday, the JFC outlined various recommendations on reducing cost of doing business and increasing competitiveness and ease of doing business in the Philippines.

“There was a lot of concern about the reputation impact of the extrajudicial killings. But most companies have realized that in most sectors, it hasn’t changed the day-to-day operating environment and most companies are pushing ahead,” Australian-New Zealand Chamber of Commerce of the Philippines president Tom Grealy said.

“The underlying economic management is good, and there is fundamental reform coming which will potentially set the Philippines up for the next 20 years, particularly the tax reform so it’s quite actually an exciting time,” he added.

With regard to tax reform, the JFC said concerns have been raised by its members over proposed provisions in the first TRAIN that could have negative effects on business process management, ROHQ, automotive, and beverage firms.

The group said some of these concerns were ameliorated in the House version of the new law, while others may be resolved in the Senate and the bicameral reconciliation process.

“JFC members support taxes that are more progressive than regressive, that incentivize individuals and corporations to work hard to produce income, save, and invest, that impose a significant burden of taxation on consumption, support investment and job creation, support needed physical and social infrastructure programs, and are collected fairly, fully, efficiently, and without corruption,” the group said.

Source: http://www.philstar.com/business/2017/09/15/1739165/least-10-b-yearly-fdi-possible-reforms-jfc