Crossroads (Toward Philippine economic and social progress)Philippine Star, 6 March 2013


Arangkada Philippines is an initiative of the Joint Foreign Chambers of the Philippines whose memberships include companies with large business interests in the country. As such, they are all stakeholders in the nation’s progress. Arangkada means accelerated motion. Rising economic growth helps them increase their business in the country. But most of all, economic growth raises everyone’s income and well-being. As they say, a rising tide raises all boats.

The Arangkada project. To enhance their contribution toward improving the business climate, they set up the Arangkada project with the support of the USAID. Unlike other development activities to improve policies, the approach mobilizes the private sector to support policy making.

The Joint Foreign Chambers in the Philippines is composed of the Philippine chapters of the American Chamber of Commerce; Australian-New Zealand Chamber of Commerce; Canadian Chamber; European Chamber; and the Korean Chamber; and the Philippine Association of Multinational Companies Regional Headquarters (PAMURI). A notable non-member of the group is the Japanese Chamber of Commerce in the country.

In order to insure that their recommendations and monitoring would have wider relevance, the monitoring exercise consulted other stakeholders. Listed among those parties consulted included various local associations and groups of businesses that are listed in the document. Notably, these groups and businesses served to contribute to the finalization of the advocacy tract.

The Arrangkada document was released in 2010, and it contains specific proposals for energizing the Philippine economy. Special focus groups in the private sector, led by the chambers, studied the problems that beset the country and drew up recommendations on economic issues and specific sectors or programs. In doing so, it also proposed many specific measures that the Philippines should promote in the future.

During their annual meeting the other week, the Joint Chambers project released their second year monitoring assessments concerning progress on their detailed recommendations. The assessments contained a detailed document: frank but credible, telling, optimistic, and cooperative in tone.

Overall assessment. That there is no room for complacency is immediately apparent from an examination of the Philippine performance placed side by side with five other major ASEAN countries (Indonesia, Malaysia, Singapore, Thailand, and Vietnam). Using charts for the respective statistics reported for these countries over the years, Arangkada demonstrates how far Philippine economic performance lags behind in terms of: investment as a ratio of GDP; net volume of FDI inflows; competitiveness ranking; and “ease of doing business” ranking.

Of 471 specific recommendations in 2012, 290 or 64.6 percent are “active “recommendations that are “moving forward”. However, 159 are “dormant”— without progress or in regression.

Those that “moved forward” have the following distribution: 205 of these, 44.4 percent, or the bulk of them, were “started” (4 star rating); and 74 recommendations, or 16 percent, have made substantial progress (5 star rating); and only 11 proposals, or a measly 2.4 percent, were “completed” (six stars).

If this program is to succeed, the number of completed recommendations would have to be larger and would cumulate over time. The 2012 results indicate a more successful year compared to 2011. Perhaps it is a learning process, both for Arangkada and for the government. It is important therefore to have persistence and patience.

This method of counting outcomes and rating them is like counting beans. The matrix of changes that need to be done is quite complex. One big contribution of the Arangkada project is that it highlights the important micro-sector issues that the government needs to pay great attention to at the agency level or at an appropriate level of coordination for their action. It is good to have the private sector pushing them.

The big benefit, perhaps, even of this approach is that major issues are highlighted. There are also important proposals which, if carried out, would lift all others toward a positive framework.

The main recommendations. For instance, despite all these details, the Arangkada document makes major recommendations to pursue eight principal sectors for the country to focus national effort on. These sectors consist of the following: Agri-business; BPO outsourcing; Creative industries; Infrastructure; Manufacturing; Logistics; Mining; and Tourism.

All of these have their place in creating employment and diversity within the economy. Many are dependent on government specific action, and on overall government policy. In some (like in BPO industries, government policy has been very supportive and the outcome successful. Yet there are nitty gritty issues still requiring action as the industry reaches maturity). The government needs to listen and do so faster to accommodate timely change.

Infrastructure. To illustrate, I take the case of investment in infrastructure as a case in point by quoting Arangkada. Composition and quality of infrastructure are extremely important in the context of accelerating economic growth. (To organize, I use parentheses and numbers on the quotes below.)

((1) Policy). The Philippines underinvests in physical infrastructure, with spending averaging 2 percent to 3 percent of GDP for the last 10 years, far below regional norms… In the WEF (World Economic Forum) Global Competitiveness Report, … the country’s overall infrastructure quality ranks below Singapore, Malaysia, Thailand, and Indonesia and close to Vietnam….

((2) Airports.) New terminals and modern equipment are needed, as are more direct international flights to regional cities. The absence of a modern international gateway airport restricts tourism, trade and investment – in short, a major turnoff for international visitors. Clark and Subic have great potential for passenger and cargo operations… Frequent change of leadership at DOTC has put the dual gateway airport concept in the twilight zone.

((3) Power.) Electricity prices are among the highest in Asia and there are supply shortages in all three grids. Unreliable, expensive electric power is a major deterrent to foreign investment. … Underinvestment in power is likely to continue unless there is a clear energy policy indicating where the country will source future energy requirements … It is essential that the transmission and distribution network expands in line with generation and growth in demand…. [This sector is full of recommendations that have not been heeded (!)]

((4) Roads & Rails.) Modern, efficient ground transportation infrastructure facilitates the efficient movement of goods and people, while its absence increases transport cost and ultimately harms country competitiveness… While DPWH greatly increased its budget in the final years of the previous administration, too much spending went into barangay roads built for political purposes. …Three light rail lines operate in Metro Manila… Unless construction [of expansions of these lines] begins in 2013, the current administration is unlikely to see any new rail or road projects, which it initiated, completed during its term. If this slow pace of implementation continues through successive administrations, the urban centers will become increasingly choked and unattractive to high levels of private sector investment.

[To be continued.]