Business World, 15 October 2014


The Philippines’ biggest challenges today and in the future are unemployment and poverty. The number of jobless workers continues to rise. Worse, the latest improvement in the unemployment rate is due mainly to fewer people looking for a job, as they become more pessimistic in finding one.

With high unemployment and underemployment, poverty incidence continues to be stubbornly constant at around one fourth of the population during the last ten years. Not surprisingly, while our Association of Southeast Asian Nations (ASEAN)-6 neighbors have long met the Millennium Development Goal of halving poverty by 2015, there is near certainty that the Philippines will miss it.

To meet the challenges of unemployment and high incidence of poverty, the Philippines has to grow faster, more equitably, and on a sustained basis.

As things stand, in order to make economic growth inclusive for any administration (the present and the succeeding ones), it should focus on agriculture and manufacturing. Poor people depend on agriculture as a source of employment and a means of survival. More than one-third of the labor force is employed in agriculture. The poor spends half of their incomes on food.

Manufacturing is important because the sector could potentially create many decent, full-time, and steady jobs. Moreover, the future of the export industry also depends on an efficient and competitive manufacturing sector. Right now, the export sector is languishing, which means higher unemployment.

But in order to help boost both sectors in particular, and the whole economy in general, the government should invest in public infrastructure, reduce the cost of doing business, and ensure peace and order at home, on the streets, and in farms and workplaces.

The government should also invest in human resources, to enable all but especially the disadvantaged, better opportunities for the future. The government has to educate, to provide health care, and to feed the poor.

Both agriculture and manufacturing needs high and sustained investment in public infrastructure and social overhead capital. In order to improve agricultural productivity the government should modernized the sector. It should invest in better seed varieties, encourage the use of fertilizers, and invest in research and development. It should invest in farm-to-market roads, irrigation, water impounding facilities, post-harvest and facilities.

Rehabilitating and building new bridges, ports, and airports to improve and reduce the cost of moving agricultural products should complement the investment in agriculture productivity enhancing investment.

The government has to be serious in agrarian reform. The uncertainty in the ownership of land should be resolved with finality. It has retarded the growth of agriculture. The policy of breaking up modest-sized farms into even smaller farms should cease. The focus should be on consolidating farms to take advantage of economies of scale.

For manufacturing, the cost of power has to be affordable and its supply reliable. But how can it be made more affordable when the regulatory framework is wasteful and reeks of rent-seeking? The harsh reality is that a potential investor needs more than 160 permits to put up and run a power plant. No wonder, power price is the costliest here compared to other countries in Asia.

While improvements were made in reducing the number of steps in setting up a business in the Philippines, it is still the most bureaucratic compared to its ASEAN-5 peers. Small, incremental improvements are not good enough since our competitors are making progress too.

It is difficult to compete with other Asian exporters, if power costs are expensive, the costs of transporting goods — by land, sea or air — are outrageous, and the prompt delivery of goods are chancy.

It is also hard to compete with our neighbors, with a relatively overvalued peso.

While the peso has depreciated in recent weeks, the currencies of our competitors have depreciated more; hence the peso has appreciated relative to other currencies. The country needs a more competitive exchange rate to help boost agriculture and manufactured exports.

One of the roles of government in modern society is to ensure peace and order for all — in their homes, on the streets, and in farms and factories. People should be able to conduct their business, and travel from their homes to their workplaces and back with no fear of being mauled, robbed, or maimed. More effective peace and order situation would increase the likelihood that goods and services would be delivered on time and with little disruptions.

At this critical juncture in its political and economic history, the country needs more than ever an efficient and effective government. It needs a new leader who is forward-looking, competent, compassionate, has excellent work ethics, and has the political will to knock down the barriers to strong, sustained economic growth decisively.