Page last updated at 06:14 Asia/Manila, Wednesday, 05 March 2014 PH
Against many odds, the Gross Domestic Product (GDP) of the Philippines grew by 7.2 per cent in 2013. I would not be surprised if in the usual review of preliminary estimates, such a figure would be adjusted upward to, say 7.5 per cent, enabling the Philippines to breathe down the neck of the Chinese in economic growth. In any case, with the exception of China, the Philippines was the fastest growing economy in Asia in 2013. Considering the major sources of growth last year, I am confident that in this Year of the Wooden Horse our economy can grow even faster at 8 per cent, finally outperforming the Asian Dragon to our north.
Let me give the reasons for my optimistic forecast. As announced by Secretary of Planning Arsenio Balicasan, one of the key growth drivers in 2013 was the increase in investments by local businesses, particularly in the manufacturing sector. Manufacturing, one of the components of industry (the others being mining, public utility and construction), expanded by a robust 12.3 per cent last year, pushing the overall industrial sector to 9.5 per cent. This rise in manufacturing is already a harbinger of the renaissance of manufacturing expected in the next five to ten years, as foreign investors--especially the Japanese and the Koreans--locate more of their factories in our country. As Director Lilia de Lima of the Philippine Export Zone Authority (PEZA) frequently informs the developers of industrial zones all over the Philippines, she expects an avalanche of Japanese investors in manufacturing, especially among the medium-sized firms, because of the energy and labor crises they are experiencing in their home country. Most of the nuclear plants have been closed in the aftermath of the tsunami. To make matters worse, Japan continues to suffer from serious labor shortages. Five years ago, the latter problem was easily solved by relocation to China. Today, after more than five years of a yearly increase of 15 per cent in minimum wages, Chinese labor costs are no longer cheap. There is already a very noticeable shift of manufacturing operations of the Japanese to Southeast Asia, especially to Vietnam, Indonesia and the Philippines. Fortunately for us, labor unrest is beginning to plague the industrial sectors of our two neighboring labor-surplus ASEAN countries. The Philippines, especially in the export processing zones, has been enjoying labor peace for more than a decade.
Together with manufacturing, construction is expected to register annual growth of close to 10 percent, thanks to a rapidly rising percentage of the government budget on infrastructure, accompanied by a most competent and honest implementation of public works projects by the leadership of the Department of Public Works and Highways (DPWH). With the plugging of the leakages occasioned by the notorious PDAP, the public money allotted to public works is being spent on real infrastructures and not on ghost projects. In addition, 2014 will see the start of three to four multi-billion pesos construction projects under the Public Partnership Program. These PPPs have suffered from the paralysis by analysis syndrome inflicting the Department of Transport and Communication (DOTC). But better late than never. We shall see a few more of them being actually started between 2014 and 2016, contributing to the acceleration of GDP to closer to 8 per cent annually over the next three years. These infrastructure projects can employ hundreds of thousands of workers, especially in the rural areas, thus making inclusive growth more possible.
Complementing the investment-led growth coming from manufacturing and infrastructure investments will be the sustainable increase of 6 to 8 percent in the remittances from the Overseas Filipino Workers (OFWs), an annual amount already exceeding $25 billion if we add the unofficial or informal receipts to the figures reported by the Central Bank. As the U.S. and most European countries slowly recover from the Great Recession, we can expect our OFWs to contribute more to our foreign exchange reserves, somehow mitigating the depreciation of the Philippine peso, which I expect to hover between 43 to 45 pesos for the whole of 2014. Our reserves will also be significantly bolstered by the earnings of the Business Process/Knowledge Process Outsourcing sector which continues to grow double digit annually. Earnings are trending higher because there is a gradual shift from low-value voice-oriented BPO to higher-value knowledge processing such as accounting, engineering, architectural, research, medical transcription services, etc. In less than ten years, this sector may even surpass the OFW remittances. Just imagine a total of say, $50 billion not only bolstering our reserves but stimulating personal consumption expenditures in the hands of the relatives of the OFWs and highly-paid BPO/KPO workers. Among other sectors that will benefit from this consumption-led growth will be domestic tourism.
The challenge to our leaders--both in the public and private sectors--is to invest in increasing the productivity of Philippine agriculture which continues to be the laggard. We must handle very skillfully the transition to a new phase of the Agrarian Reform Program, shifting the emphasis from land redistribution to providing the more than five million agrarian reform beneficiaries with the farm-to-market roads, post-harvest facilities, irrigation systems, etc. that they were denied in the first phase of CARP. Whatever large farms still exist--whether in public or private hands--have to be devoted to such higher-value crops as palm oil, coffee, cacao, rubber and hybrid coconut trees. There must also be a more efficient delivery from the State of quality public education, primary health services, technical training programs, socialized housing and access to potable water to the poorest of the poor. Only then can we consider the 8 per cent or more of GDP growth as truly contributing to integral human development, i.e., to the welfare of every human being and the whole human being. For comments, my email address is email@example.com.