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| ON THE OTHER HAND |
| Hooray for 6.9%
By Antonio C. Abaya Written June 04, 2007 For the Standard Today, June 05 issue By any yardstick, the news that the Philippine economy grew by 6.9% in GDP during the first quarter of 2007 is cause for celebration. This is the highest that the Philippines has ever achieved since 1988 or 1989, under President Cory Aquino. GDP stands for Gross Domestic Product, or the value of the goods and services created in a national economy in a given time frame compared to a similar period the previous year. GNP stands for Gross National Product, or GDP plus remittances from overseas Filipino workers and the earnings of Philippine-owned investments abroad, the so-called net factor income. GNP is supposed to have grown by only 6.6% in the same first quarter, as compared to last year. Since OFW remittances have not decreased during this period compared to last year � it has in fact increased - we can only surmise that the lower GNP means Philippine-owned investments abroad suffered substantial losses. Or somebody in NEDA misread the GDP for GNP, and vice versa. Just as we blame President Gloria Arroyo for everything that goes wrong in the country, we should also congratulate her when something goes right, In this particular instance, she was directly responsible for this positive turn of events. It was she who batted for the passage of the Expanded Value Added Tax law last year.. The increased revenues have given government more resources, theoretically, to increase spending for infrastructure (roads, electric power plants, ports) and social services (education, health care, law and order), which translates into a better business environment and more investments into the economy. The additional revenues from EVAT also reduces government borrowings, thus freeing more credit available for the private sector and keeping the inflation rate low, which is also the proper environment for investments to be enticed to come in. Whether these two effects will in fact materialize remain to be seen in the coming months. This early it can be seen that there has been a substantial influx of foreign capital, which manifests itself in the record-breaking performance of the stock market and the strengthening of the peso to a level unknown since the Asian financial crisis of 1997. There has also been a spike in foreign direct investments � which is preferable to the hot money flooding the stock and real estate markets � largely because of the decision of Texas Instruments to invest another $1 billion in their facilities here. But the strong peso has caused millions of Filipino families, dependent on remittances of relatives working abroad, to suffer a substantial reduction in the peso value of their monthly dollar incomes from abroad. It has also caused the exports sector to suffer billions of pesos worth of losses in their activities, in the reduced peso proceeds of their export earnings. At the same time, domestic producers are also negatively affected because the strong peso makes imports cheaper and makes their products vulnerable to under-pricing by imports, especially those from China . The strong peso also makes petroleum products � our biggest single import commodity � cheaper, but this is only theoretically. The LPG that we used to buy for less than P520 last month now costs P555 per ll-kilo tank. Gasoline and diesel prices have not gone down commensurate to the strengthening of the peso. While we welcome the up-tick in many economic indicators, words of caution have to be said to put things in proper perspective.. One quarter of 6.9% GDP growth does not a Tiger Economy make. Ever since I started writing a column in 1987, one of my main themes has been that the four original Tiger Economies in East Asia � South Korea, Taiwan, Hong Kong, Singapore � achieved their levels of prosperity through 20 years � or 80 quarters - of rapid GDP growth of from 8% to 12%, achieved largely through the export of manufactured goods. From the 1980s and 1990s to the present, Malaysia , Thailand and Suharto�s Indonesia followed this same path of exporting manufactured goods to prosperity. The Philippines was the solitary exception. President Marcos concentrated on giving his relatives and cronies monopolies in the domestic market. His half-hearted attempts at manufacturing for export were deliberately wrecked by the communist KMU labor unions. So, given our handicap of a late start and the fact that President Arroyo does not even include manufacturing in her Mid-Term Development Plan � because she is a believer in Free Trade and Globalization and does not think we should bother to compete in manufacturing � can we sustain a 6.9% or higher GDP growth for the next 79 quarters or 19 and � years? If so, how? We should not forget that the 6.95% growth achieved by President Aquino in 1988 or 1989 was wrecked by the attempted coup d�etat of Gringo Honasan and the RAM in December 1989, which caused our GDP to drop to 3.1% in 1990 and zero in 1991. Obviously, Filipinos have forgotten that, because they have elected Honasan senator, not once but twice. Onli in da Pilipins are coup plotters allowed to run for public office, and actually win. When he was still presidential economic adviser, Joey Salceda unveiled an economic plan that he called the 7-8-9 Plan, by which he proposed to achieve a GDP growth rate of 7% in 2007, 8% in 2008 and 9% in 2009. But he did not spell out, or I didn�t read or hear him spell out, how he was going to achieve this. This is no different from the 747 Plan, unveiled by Speaker Jose de Venecia two or three years ago: 7% growth rate 4 (for) seven years. Again, without any nitty gritty details about how he was going to attain this goal. Not to be outdone, President Arroyo announced last year that she intended to make the Philippines a First World country by the year 2020, if we �would just stay with her.� This was her most blatant statement yet that suggested that she wanted to remain in power beyond 2010, as prime minister. Hence, all the maneuvers, past and future, to amend the Constitution to shift to the parliamentary form of government. Given that the poorest First World countries ( Portugal , Greece ) have per capita GDP of more than $20,000, for our present per capita GDP of $1,463 to reach $20,000 by the year 2020, we would require a GDP growth rate of more than 15% per annum for the next 13 years. Not even China grew that much that fast. So, hooray for 6.9%! Let�s see what, if any, can be done to make it 8% and 9% But 15% is pure hallucination. ***** Reactions to [email protected]. Other articles in www.tapatt.org and acabaya.blogspot.com OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO Reactions to �Hooray for 6.9%� Dear Manong Tony, My optimism about the possibility that Plan 7-8-9 is still achievable was revived after I learned about our first quarter economic growth of 6.9%. This was further bolstered by the strong peso, the upbeat stock market and the low interest and inflation rates. Let us not be concerned about Moody's forecast. That is why the company's name was Moody. He-he. President Gloria Macapagal-Arroyo had avoided mentioning Plan 7-8-9 for a long time. The numbers that she kept mentioning for the past two months, before the first quarter economic data came out, was in a ballpark figure of 6% for the next three years. I am hoping against hope that PGMA will again talk about Plan 7-8-9 and outline, in layman's language, how these numbers can be reached. Maybe we have to wait until she unveils her economic plans to congress next month. I wrote about Plan 7-8-9 amd 8 in '08 more than two months ago. It was published in another daily newspaper and I am attaching the original draft for your ready reference. God bless. Jerry A. Quibilan, (by email), June 05, 2007 A beautiful dream: 888 Number 8, for a lot of us, Chinese, Filipinos, and Chinos, means good luck. A decade ago, Hong Kong auctioned vanity car license plates and the highest price which fetched millions of HK dollars was the number 8888. Years later, this was duplicated by the Land Transportation Office and the license plates with the numeric 888 also fetched the highest prices. What does �888� means to us in economic terms? � This is my economic interpretation of the latest battle cry of President Gloria Macapagal-Arroyo. On December 27, 2007, PGMA declared, 2007 is year of the Filipino Entrepreneur whose businesses will be the lead driver of the economy. The government has been laying the groundwork � including increasing investor confidence through fiscal reforms � for a conducive environment for business especially for small and medium enterprises (SME�s). We shall continue to breach poverty as we move forward, broadening education, and health services to build minds and bodies to compete in the world and infusing resources to pull the bandwagon of grassroots enterprise. Let 2007 be the year for the Filipino entrepreneur, building on the courage, perseverance and skill of the Filipino people. An office was created for this purpose. In addition, a consultant in the private sector was also appointed.- I had written about this and it is posted in the web. �Creating one million entrepreneurs� was the mission of Senate President Manuel Villar while he was still a Representative in 2001. The writer came to know of this mission while having coffee with a Malaysian friend in Kuala Lumpur . He just came from Bali , where then Rep. Villar spoke about his mission. Shortly after I arrived in Manila I wrote about it and the article was published in one of the daily newspapers. On February 20, 2007, PGMA unveiled her administration�s ambitious �Plan 7-8-9�. This numbers represent the Gross Domestic Product targets for the years 2007, 2008 and 2009. It was a departure from the 7%-8% growth for the years 2009 and 2010 outlined in the Medium Term Philippine Development Plan 2004-2010. On March 3, or two weeks later, it was, �8 by 08�. This means achieving the eight blessings of a strong economy by 2008 as tangible fruits of the administration�s commitment to bring the benefits of the fiscal momentum directly to the people. These eight blessings are: job creation; better cost of living; s strong peso; more investments; pro-poor education; pro-poor health care, housing, food. On March 8, Press Secretary Toting Bunye, in his speech at the Rotary Club of Pasig, added two more blessings: a green Philippines and more victories in the fight against terror. In effect our people will be expecting ten and not eight blessings in 2008. On March 10, PGMA announced that the economy may grow 7% in 2010 or earlier, a figure that is close to those in the MTPDP. � What will be the next growth figure in this numbers game? I will not play around with these critical numbers. I am a marketing man and not an economist. What I can say is that despite many criticisms that I read, see and hear from the tri-media, I am a beneficiary of our economic rebound. I would stick , therefore, to �888� which means that if the 8% growth will be achieved in 2008, 8 blessings will be enjoyed by our countrymen. These targets are ambitious and unrealistic as many critics have said and will continue to say, but we can dream, can�t we? Dreams do come true. Jerry A. Quibilan Brotherhood of Christian Professionals and Businessmen Quezon City Chapter March 25, 2007 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Hooray for Mr. Antonio Abaya!....who gives credit when and to whom it is due, thus confirming that our favorite journalist is indeed objective and fair throughout. If we can be quick to blame GMA even for the littlest crack on our roads and the shallowest flood in our village, then it's only fair that she gets our accolade for even a semblance of economic turnaround the 6.9% GDP growth rate implies. So, you see, it's not just all brickbats from ACA. Cheers to you, Mr. Abaya! Manuel R. Guillermo, (by email), June 05, 2007 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Dear Tony, Yes, it�s good news, but like you say, things could suddenly turn around, compliments of the adventurers in our midst. And yet these guys time and again get elected and reelected. For this I blame our local media, who put these jokers (and leftist ideologues) on a pedestal, reporting their every statement, as if it were some great prophet speaking. The prime example of such media creation is Trillanes. From being relatively unknown to a senator-elect, without even campaigning! Robert Paradies, (by email), San Francisco , CA , June 05, 2007 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Dear Mr. Abaya, You're right, let's give credit where credit is due. Kudos to GMA ! for raising both the GDP (Gawa Dito sa Pilipinas, para madaling maintindihan) and GNP ( Gawa Ng Pilipino regardless of where they are globally, para madaling maintindihan). Sincerely, Auggie Surtida, (by email), Tigbauan, Iloilo , June 05, 2007 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Dear Tony: Let me join you in commending President Gloria Macapagal Arroyo for this significant one-quarter achievement of the economy. Going by the anaemic achievements of the past, this one-quarter growth of 6.9% is indeed significant. But let us not make the mistake of being euphoric about this achievement. One quarter is still only three months. When the economy's performance for a whole year of 12 months is in, it is quite possible that the actual growth of the Philippine economy could very well be in the order of anywhere from 5% to 5.5%. That would still be respectable for a poor country like the Philippines . Realistically, an annual GDP growth in the range of 5 to 5.5% is a long way--a very long way--from making it possible for the country to join the enviable ranks of the Asian economic "tigers." And what about annual GDP growth per capita? Given the average annual growth rate of the Philippine population at 1.95% now, which is still very high in the context of a stable or a replacement rate of growth, it will take the Philippines indeed a long, long time--if ever-- for its annual GDP per capita to reach the level of $20,000. If by sheer national effort and will it does, predictably by that time the annual GDP per capita of those Asian economic tigers will also have reached the level of $30,000 to $40,000. Obviously playing catch-up is hard to do. Mariano Patalinjug, (by email), Yonkers , New York , June 05, 2007 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww I enjoy your articles. They are impeccably researched and accurate. The unbiased viewpoint is refreshing. David L. Sherrill, (by email), Nashville , Tennessee , , June 05, 2007 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Dear Tony, You have a very enlightening article about GDP and GNP. I am not well versed with economics but this I know and understand. We have many laws and government policies that are counter-productive to the Philippines and it's citizens. 1. Our Labor Code is upside down. We go no with minimum wage law so work and productivity goes to the minimum and even negative. We should have instead a Maximum Wage Law where workers and employees are paid according to their maximum productivity. 2. Land Reform and CARP parcelized farmlands from economic size to small garden plots.Mechanized farming with tractors have no use, and even carabao farming is no longer affordable. Our Agricultural productivity has suffered. If we keep on doing this, we will have to depend on other countries to supply the food we eat. Almost one half of the beneficiaries of Land Reform have sold, lease or are the new landlords with new tenents. Sad to say they are too many and too small, poor and lack the technology of farming, much more no good market linkages. Many wealthy landowners are now as poor as their former workers who are lording it over their farms. 3. Changing the Constitution (The basic law of the Land) too often to suit the desires and objectives of those in power to retain their power perpetually in the family is doing us no good. Will we always allow these so called leaders and servant of the people play with our laws? 4. Anarchy and perpetual state of rebellion always destroy what is built. The Philippine Communists can never be trusted, since they use the barrel of the gun to influence poor unarmed people in the countryside and hinterlands. The Muslin rebellion in Mindanao started with the support of the Philippine Government (Marcos Adm.) the Sultanate of Sulu to reclaim North Borneo Territory . Ninoy Aquino exposed this after the Javida massacare. So the Malaysians countered, who are also Muslims encourage the Muslims in Mindanao to rebel against the Manila Government and reclaim Mindanao as the land of the Moros. Even a Bulakeno Senator, Ople supported them with his Muslim Mindanao State . 5. Politics, Religion, Laws, Trading, Banks and even Mining do not create wealth. They only transfer the money from one hand to another. It is Agriculture, Fisheries, and manufacturing that truly create wealth. We better focus on them to have that 15% GNP or GDP what ever you want to call it. Yes it can be dome if we get serious and make all idle hands and time become busy and productive. Kayang kaya basta samasama. 6. Home industries, cooperative marketing, and inviting big companies with export markets to supply, to locate in the provinces, provide jubs and livelihood in the rural areas so the flow of population from the cities will go back to the countryside where they can be more productive and live in healthy environment, at lower lost of living. Example are the new banana plantations in Datu Paslas, Buluan in Maguindanao. Former rebels are now gainfully employed. A plan to invite a big pineapple company to locate in Sulu will greatly help poor families on those islands gain gainful jobs and livelihood legally and morally. 7. We have to teach our farmers to make their one hectare farm productive from their present rice, corn coconuts where they earn only P15, 000 to P40,000 into high value commercial crops, poultry and livestock where they can earn P150,000 to P500,000 per hectare per year. This is starting to happen with the present trust of the Department of Agriculture and other government agencies and NGOs assistance. 8. We should clean our judiciary and remove the Department of Injustice and politics to gain back people's confidence. Let us not make the law a business of lawyers. 9. Let us bring morality in our families, mass media, governance and even business to really progress and have a better quality of life for all. Parents, School, Churches can work together with the mass media. GOD BLESS THE PHILIPPINES . Thank you again Mr. Abaya for your enlightening article. Rex Rivera (by email), June 05, 2007 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Dear Mr. Abaya, Yes, Hooray! Rah! Rah! Rah! But let us not forget, our OFWs' remittances make up for much of the GNP. We thank them forever. (OFWs� remittances would make up about 20 to 25% of our GNP. ACA) We still have to transform our nation from a nation of consumers and employees to a nation of shopkeepers, traders, businessmen and employers. Our children have to learn business, trade and finance from grade school. This is the only way we can compete in this world. I dare you to ask out of a hundred men and women and teenagers in the street of Makati : How many of you understand the article of Mr. Abaya? The stats will be very interesting. (Sorry, but I do not write my articles for the men, women and teenagers on the streets. ACA) The reason for this is that we are not business-minded as a people. We just want to get our hands on the money and never mind the mechanics. We are employee-minded, that's why. Kahit ano na lang trabajo basta't magka-pera lang . Let's harness the OFWs. Their $10 per share contribution to the Global Filipino Fund that will fuel (a) revamp of the educational system towards learning business, trade, entrepreneurship (b) a Grameen-type of microlender and (c) to reward informers, whistleblowers toward the prosecution of inept and corrupt public servants through exposes by a newspaper (La Solidaridad) may just do it. God bless, Lionel Tierra, (by email), Sacramento CA , June 05, 2007 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Tony, I join you in cheering our 6.9% GDP and 6.6% GNP growth rates (even if only for the 1st Qtr.) and welcome your acknowledging that PGMA can actually do something right for our country (surprise!) with almost the same enthusiasm that you greeted Trillanes� being in the winning column. (�Enthusiasm�? I merely wrote, �The biggest surprise, and a welcome one at that, is the unexpected and unforeseen rise of Antonio Trillanes IV as a major political player�� You call that enthusiasm? I thought it was a mere statement of fact. ACA) Your value judgment is getting clearer each time. I�m glad too that you refreshed your readers� memories on how (Senator-elect) Gringo Honasan criminally sabotaged our country�s take-off to progress not once but several times with a number of lives snuffed murderously in the process. But I guess the refresher came too late to enlighten voters who still use their brains. (I have written about a dozen articles pointing out Honasan�s role in wrecking the Philippine economy in 1989-1991. You may want to check out my articles �Gringo � Nation Wrecker� (Aug.13, 2003) and �Idealism for Rent� (July 30, 2003), both archived in www.tapatt.org. ACA) Some people do not believe as you do that Honasan �actually� won. They rather suspect that he was �accommodated� with the help of power brokers who may have bluffed and black-mailed the past administrations to keep him from disturbing the peace in our land. Did �some people� do a statistical analysis of the Comelec data in 1995? I did and I found and wrote that Juan Ponce Enrile benefited from fraud in at least eight provinces, Ramon Mitra in four. I found no indication that Honasan benefited from fraud anywhere. In the just concluded 2007 election, Honasan was in 11th place in the Pulse Asia exit poll. It is therefore not surprising that he is in 9th and 10th place, respectively, in the still incomplete Comelec and Namfrel counts. ACA) He was like a spoiled brat who was given a supply of lollipops to lick to his hearts content to keep him from his destructive tendencies. Like what your friend FVR did that somehow led to a short spell of economic progress. That, they say, apart from his much vaunted �special ops� that can practically dictate who will win and not. I don�t know if your critical mind thought of that possibility in the last �elections� or kung paano nila nagulangan ang mga bobong strategists ng Administrasyong ito. We are looking forward your own insight on who benefited in one of the most raucous elections we had as pictured by media. Back to the welcome economic figures: while our intrepid OFWs are getting less pesos from their hard earned foreign currencies, this is not a big problem at all as their newly acquired purchasing power can still sustain the better quality of life they are now enjoying to the glee of Henry Sy and the other Mall magnates. In fact Globe and Smart continue to rake in scandalous amounts from the disposable incomes of families of OFWs and for that matter, the whole new middle class. By the way, why are these heartless telecom companies allowed to rob the pre-paid subscribers (in millions each day for sure!) in �expired� loads? If that is not greed in the most despicable form then Antonio Abaya does not exist. Where is that much ballyhooed �corporate social responsibility�? No matter how prejudiced some people are against this Administration we must learn to accept that the now feared strengthening of the peso continues to actually mitigate the increase in the prices of fuel and collateral commodities (except LPG which continue to defy logic). And that benefits ALL including the local intelligent (ehem..) readers of and Mr. Abaya himself. I think that is also what keeps the intelligentsia (read Silent majority) from joining the repeated attempts to topple this Government. Somehow they see through the issues, the contrived and scripted just like the way black propaganda are made. Now, I wonder if this Administration will have the political will to continue the prosecution of Honasan, Trillanes and Lacson as well as Binay and co. What happened to �probable cause�? They are probably still in a quandary. Is that really how politics should be? Do we deserve what we are getting? I wonder how our fortunes are now if the screaming fans of the late FPJ and his angry wife succeeded in making them king and queen of our Republic. Guess who would be calling the shots� after the shoot out. Vamos a ver. Ed .J. T.Tirona, (by email), Paranaque City , June 05, 2007 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww 6.9% rate of growth is very good. Gloria Arroyo may not be perfect, but she's doing pretty well, compared to past presidents we have. Let's encourage the good people in the government and throw out the bums. That will take time because of the culture in our country. Virgilio Gonzales, (by email), California , June 06, 2007 (Only Gloria Arroyo, not we, can �throw out the bums.� If she does not, then it means she still likes the �bums� or still has some use for them. ACA) wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Rhetorics are powerful hallucinogens. But we, the disillusioned people, are willing to wait and see. Thank you again for explaining the economy to me/us. It is still difficult to say which president/congress did well or bad for our economy. Only time will tell. Yes, there are advantages and disadvantages of a stronger peso. I guess we have to produce more exports to off-set the loses from products manufactured from imports made when the peso was weak. Should raw materials be bought now to prepare when the peso gets weaker again? Make the demand attractive so we can double up our supply? Some people have not forgotten what Honasan and Trillanes did to our economy. They must do something really big in the Senate to be forgiven. Although I believe Trillanes really wanted to expose what was/is happening in the military, his means did harm to our economy. And he should have run independently. Now that he has the legal right to do something, he must act well, appropriately and effectively. As far as Honasan is concerned, I detect his desire to be continuously pedestalled as the EDSA hero which he really was/is not. He has done nothing of significance the first time he was elected senator. Thank you again. Keep us well informed. Pura Flor Isleta, (by email), June 06, 2007 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww (Copy furnished) Before you start your song and dance routine in celebration of the 6.9%GDP growth rate GMA posted for the first quarter of the year, read the analysis of an economic researcher on the actual state of the nation�s economy. Ruben Gomez, former SVP of Dole Phils. Graduated from ADMU (summa) and took his MA Economics at MIT, Boston . He is the contemporary of Bert Fenix and Jolly Benitez. Robert Kelemen, (by email), June 06, 2007 Dear Vince, Thought I'd beat you to the punch in case you ask my opinion about the latest statistics on GDP growth. I have attached a page copied from the NSCB (National Statistics Coordination Board) which issues the GDP statistics, showing some of the details on the latest statistics. Simply, the government says that real GDP in the first quarter of 2007 grew by 6.9% from year-ago levels, which is one of the highest real growth rates since about 1990. Now 6.9% is a fairly hefty growth rate, which should silence most of the critics of the GMA administration. That is, until you take a closer look at the figures: (1) The main driver of growth is an item called Government Consumption, which grew by 13.1% in real terms over year-ago levels. In short, government election spending in the first quarter of this election year is the major cause of growth. Surprised ? (2) If you look at the item called Capital Formation --- this is really another name for investment --- it grew by a very anemic 0.6 %, lower than the rate of population growth, and contrary to all the hooplah about foreign investors tripping over themselves to invest in the Philippines . Those investors must know something. Is it because every time the government pump-primes the economy, as it is doing now, something unpleasant happens to investment afterwards ? (3) In the presidential election year of 2004, real GDP grew by 6.5 % in the first quarter versus the same quarter of the previous year. So, the 6.9 % growth figure this election year is not so outstanding, given the pattern for election year spending. One does not have to go all the way back to 1990 looking for superlatives. (4) What happens to GDP growth rates during election years ? In election year 2004, the real GDP growth rate of 6.5 % vs previous-year levels in the first quarter had dropped to 5.5% by the fourth quarter. (5) Nonetheless, because of the heavy election spending, the full-year real GDP growth rate for the entire 2004 was still 6.2 %. However, the real GDP growth rate dropped to 5.0% the next year 2005, and to 5.3 % in 2006. In short, you get a boost only during election years since politicians think voters are too stupid to remember what happened in non-election years. (6) As I have written in one of my papers, whenever the government pump-primes, the country usually suffers after a time lag (say about a year or so) since inflation usually accelerates or the peso comes under pressure. Somehow, the central bank never learns, always thinking that it can walk on water, always thinking that it can ratchet up the money supply to support the heavy election spending without any consequences. Someone who keeps making the same mistake again and again --- that goes beyond stupidity. wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Hello Tony! This is probably the best time for GMA to announce that she will not tamper with the constitution anymore and focus on governance until 2010 only. Following this and considering that she will have nothing more to lose, it is also the best time to promulgate politically unpopular but sound measures to more rapidly develop the economy, such as Malaysian-type counter-insurgency laws, putting more teeth into that joke of an Anti-Terrorism Act (Tony, have you written something on this? I can't seem to recall your having done so directly and I'd like to read your take on this law.), confinement of protests to the open countrysides where they cause minimal disturbance, a moratorium on strikes, elimination of the pork barrel, regional election of senators (Can this be done without violating the constitution? , accelerating agrarian reform to include plantations like Hacienda Luisita, etc. Sure, she will bow out as the most unpopular president but the long term effect will be tremendous and history will be kind to her, provided her successor does not undo these measures. Herminigildo Gutierrez, (by email), June 06, 2007 wwwwwwwwwwwwwwwwwwwwwwwwwwwwww Hi, Tony. Hooray for you! With regards competitiveness in manufacturing, I haven't figured out how we can compete in manufacturing against the Chinese or the Indians when their labor is so cheap, probably twice or thrice cheaper than ours. Even Indonesian labor is cheaper. I am basing this on labor cost for shipbuilding and crew wages, of which I am familiar with. Can you suggest which goods we can manufacture at a competitive advantage? As an economist, I always believed we should focus on areas where we have a competitive advantage. Which is why focusing on mining, tourism, business process outsourcing, bio-ethanol, medical tourism, services, food, housing and some areas in agriculture make sense. If the economic reforms in the charter will be instituted in the coming years, and if the Senate focuses itself on passing the necessary economic bills, then we can see the economy exceeding 7% next year. And if the Filipino people including media become more positive in its outlook, have more faith in its capability to become a first world country, then the economic growth may even reach 10%. Cheers! Bobby Tordesillas, (by email), June 07, 2007 wwwwwwwwwwwwwwwwwwwwwwwwwwwwww Hooray for her most effective economic strategy: Make more people hungry to boost employment abroad by taking even the most degrading work in the world just to earn the dollars they would remit to their families. Hooray to her REMITTANCE ECONOMY! James Tanaka, (by email), June 07, 2007 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Hooray indeed for the good news. Hope the country keeps it up. But with Honasan reelected, will he wreck the economy again? Who sponsored the EVAT bill on the Senate floor? Who were against it? That would be interesting to know. How would you rate the newly elected senators on performance in a scale of 1 to 10, with 10 = tops and 1=slacker. Where does Loi and Jinggoy fit in? Hope Sen. Loi Estrada will sponsor a "Family Planning Bill", addressing the health concerns of our "masa" . In my last visit, the Batasan location vs. the Mall of Asia location is a study in contrast Congested Commonwealth Avenue lined with small shops/shanties vs. the wide open spaces and a beautiful Manila Bay at sunset. ( Pearl of the Orient!). Is this the route our lawmakers take when they bring our visitors to address Congress? Ernie Aragon, (by email), Hagerstown , Maryland , June 08, 2007 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Did I read this article right? Praises for PGMA?? I expected everyone and everyone outside of government to uniformly pooh-pooh this result and state with conviction that it had nothing to do with her management of the economy. I expected the usual bellyachers and know-it-alls to complain that the economic results are still meaningless for their beloved poverty-stricken countrymen who have never felt its benefits. I expected the good-news-is bad-for-our-business media to have ignored or downplayed or criticized the results. I expected PGMA's hardened critics and enemies to further froth at the mouth in questioning it and casting doubt on the improvement in the economy which would only make her look good (a very big no-no in the effort to bring her down hard). This doesn't sound like the country I know. It doesn't have the right feel to it. RR, [email protected], June 09, 2007 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwww I continue to appreciate, and treasure, your insights. Thanks a lot!! Ernie Ordonez, (by email), June 10, 2007 Agriwatch Philippines wwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Hi Tony, The growth in the Services sector is possibly a way to sustain the 6.9%. if I recall correctly, over 4% is the services growth with industry and Agriculture being far behind. I am attaching some articles from Dr. Talisayon that may explain this phenomenon and may give us a road map for sustainability. Hope you have the time to read them. Best regards. Guillermo "Chito" Prat, (by email), June 14, 2007 (Sorry, but there is no room at present in the website to load Dr. Talisayon�s articles. Perhaps sometime in the future. ACA) Wwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Anatomy of the 6.9% Growth. D�j� vu? By: Victor S. Barrios [1] San Francisco, CA The Philippine economy showed a robust Gross Domestic Product (GDP) growth rate of 6.9% during 1Q 2007, the highest since 1990. Country credit rating has improved. Portfolio money is pouring in. There is an emerging euphoria in the air. Are happy days here again? The Issues What are the growth engines? What should be done to make them sustainable? What are the pitfalls if the growth engines are not sustainable? How do we avoid a day of reckoning? Telescoping the Sources of Growth Personal Consumption is by far the main source of growth, strengthened by government pump priming activities prior to the May 2007 elections. 1Q 2007 Personal Consumption grew by 5.9%, up from the year-ago level of 5.3%. Since Personal Consumption accounts for three-fourths of GDP, it is the principal growth engine, contributing a 4.4% weighted growth rate out of the 6.9% GDP growth. (See Table 1.) The steady rise in forex remittances from global Filipinos continues to fuel rising Personal Consumption levels. Government Consumption grew by 13.1% vs. last year's 7.6% rise. Because the rise is traced to spending related to the suffrage exercise, it tended to reinforce the strength of Personal Consumption. However, the fact that Government Consumption represents only 7.1% of GDP has muted the impact of election expenditures. If official data on the trade sector are accurate, the positive trade balance, which is unusual for a capital importing country, had a significant impact on GDP growth. Reported imports dropped by 2.5% amidst anemic exports that grew by 9.1% compared to 13.0% in 2006. The reported trade balance of P10.2 billion represents 3.2% of GDP. If the chronic trade deficit recurs, not unless the country becomes a capital exporting nation, there could be a soft underbelly for GDP growth. GDP is the sum of Personal Consumption, Government Consumption, Capital Formation and the Trade Balance (Exports � Imports). A review of the official data shows a discrepancy of P10.3 billion or 3.2% of GDP for 1Q, 2007. Policy Concerns Notwithstanding the apparent GDP statistical discrepancy, there are major policy concerns that need to be addressed: 1. The economy is consumption-driven. This means there is over-reliance on Personal Consumption and Government Consumption, which add up to 82% of GDP. These are the "Achilles Heels" of the economy. In the thick of battle, when smart money moves, such vulnerability could be deadly. The lessons of history are clear. They need not be repeated. 2. The capacity-building engines, namely, capital formation and exports, are extremely weak. Capital formation is only 18% of GDP, whereas a minimum of 30% is needed for an emerging economy to move to a higher growth trajectory. Many years back, the economy was hitting a capital formation ratio of 30%. Exports have been wobbly, which is not a source of comfort. Looking Ahead The improvement in the country's credit standing supports the aim of raising capital formation. There are recent stirrings of increased Direct Foreign Investment (DFI). An improved investment cum political climate is needed to raise FDI to levels approximating the emerging economies of Southeast Asia . The authorities have to address the menu of issues that existing foreign investors have raised concerning the local investment climate, e.g., level playing field, consistency of public policy, the slant of labor policy, sanctity of contracts, etc. The country has the luxury of having forex remittances on a sustained and rising basis - - a situation that buys time for policy intervention to evolve and establish roots, a process that has a long time line. But what is disturbing is the fact that the buoyancy shown by global Filipino remittances is leading to a squeeze on the ability of OFWs to cope with the more than 20% appreciation of the peso versus the US dollar over the past year. Is that a source of joy? Hardly. The drastic forex rate adjustment has significantly hurt exporters of both goods and services. The export competitiveness of the country in certain products has greatly eroded or vanished. The authorities have not taken any action to address the harmful appreciation of the peso. Bangko Sentral ng Pilipinas lately reportedly expressed concern about the impact of the strong peso, but indicated that the forex rate would be "market determined". The authorities seem to miss the point that there is, using economic parlance, "market failure". They should not allow the continued "free fall" of the peso/US dollar rate. Doing so would bring the days of reckoning closer to reality. D�j� vu? Table 1 ANALYTICAL SYNOPSIS: PHILIPPINE ECONOMIC PERFORMANCE, 1ST Q, 2007/2006 Amounts in Million Pesos, 1985 Prices 1st Quarter, 2007 Ist Quarter, 2006 EXPENDITURE Amount % of GDP % growth Weighted Growth Amount % of GDP % growth Weighted Growth Personal Consumption 241,353 75.3% 5.9 4.4 227,902 76.0% 5.3 4.0 Government Consumption 22,904 7.1% 13.1 0.9 20,259 6.8% 7.6 0.5 Capital Formation 56,548 17.6% 0.6 0.1 56,201 18.7% 0.3 0.1 Trade Balance, of which: 10,194 3.2% n.a. n.a. -6,493 -2.2% n.a. n.a. Exports 155,287 48.4% 9.1 4.4 142,303 47.4% 13.0 6.2 Imports 145,093 45.2% -2.5 -1.1 148,796 49.6% 0.7 0.3 Gross Domestic Product 320,698 100.0% 6.9 6.9 299,976 100.0% 5.7 5.7 [GDP, as checked (a) 330,999 297,869] Net Factor Income 29,714 8.5% 1.0 28,617 8.7% 13.4 [1] The author is Chair, Global Filipinos Coalition, and Moderator/Convenor, Global Filipino Forum OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO |