Bernardo M. Villegas
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Rebalancing Strategy
published: Mar 31, 2017



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Thank You President Noynoy Aquino

           It is only just that the Filipino nation should thank outgoing President Benigno S. Aquino III for having done his share in transforming the Philippines from the “sick man of Asia” to the new “Asian tiger,” as many outside analysts and observers have remarked unequivocally.  President Aquino, you have been humble enough to state that all the good things that have occurred during your watch should not be attributed to you alone.  In your words, “you are just standing on the shoulders of the leaders who came before you.”  By the same token, the presumptive President Rodrigo Duterte will inherit an economy at a higher level than at what you started in 2010 because of some significant decisions that you made as President of the Republic of the Philippines.

          First, it is the highest compliment to you and your economic team for the Duterte Cabinet to state as the very first item in their Economic Agenda “to continue and maintain the current macroeconomic policies.”  Indeed, not only did your Administration attain the highest annual average GDP growth compared to all the previous Administrations.  Building on the prudent fiscal policies initiated by your immediate predecessor, Gloria Macapagal Arroyo, your Government brought the average annual inflation to the lowest ever while significantly increasing the infrastructure spending to close to 5% of GDP from below 2% before 2010.  Because of your very prudent fiscal stance, which has been criticized as overly conservative, you have given the next Administration much leeway for deficit spending on poverty eradication and continued improvement of infrastructures.

          Your defining contribution to the long-term sustainable and inclusive growth of the Philippine economy has been the sincerity with which you waged the anti-corruption fight.  Although much still has to be done to improve governance in the Philippine government, you have convinced especially the outside world to grant the Philippines several investment upgrades in our credit rating because you have been perceived as exerting your best effort in eradicating corruption. Although there have been other positive factors considered by the international rating agencies, I attribute the impressive jump of 38 notches in Global Competitiveness Ranking issued by the World Economic Forum to improvement in governance in general.   From 2010 to 2014, the Philippines was the most improved country overall.  In the Doing Business Report of the International Finance Corporation (IFC), the Philippines jumped 45 notches from 2010 to 2016.  In the Economic Freedom Index of the Heritage Foundation, the Philippines improved 45 notches in the same period.  The Transparency International ranked us 39 positions higher.  There is no question that your leadership has resulted in significant strides in our journey towards a more efficient, free, transparent and competitive economy.

          The Filipino people and the next Government should also thank your Administration for laying a more solid foundation for the renaissance of the manufacturing sector.  It is clear that we cannot put all of our eggs in the Services basket.  Thanks to the efforts of the people you appointed in the Department of Trade and Industry, the growth of manufacturing has outpaced services in the past four years.  From 2013 to 2016, average quarterly growth for manufacturing was 8.1 percent while services posted an average of 6.6 percent. Another very positive trend on which the Duterte Administration can build is increased role of investments in propelling economic growth in the country, thanks to the very pro-active role of the DTI in promoting manufacturing investments.  In 2015, capital formation accelerated by 23 percent compared to consumption and government spending which rose by 7 and 9.9 percent respectively.  In the first quarter of 2016, fixed capital expenditure grew by 25.6 percent, the highest year-on-year growth in more than a decade.  Thanks to the leadership of DTI, the Duterte Administration will inherit a very detailed Manufacturing Industry Roadmap which aims to build more globally competitive industries and through the Comprehensive National Industry Strategy, lengthen manufacturing linkages with both agriculture and services and integrate industries, especially the small and medium enterprises, in global value chains.

          Finally, we should thank you for laying the foundation for a long-term human resource development program through your support of the K to 12 curriculum, despite strong opposition from some sectors.  The Philippines cannot make the transition from a middle-income country to a First World economy in the next generation unless we capitalize fully on the demographic dividend or sweet spot that we will be enjoying for at least the next twenty years.  Our move towards a knowledge-based economy cannot happen if we continue to under prepare our youth for tertiary education with the least number of years of schooling in the entire East Asian region,  where basic education can take anywhere from 12 to 14 years.  The professionals and knowledge workers of future generations will be forever grateful to the leadership in your Department of Education for having been resolute in their implementation of the K to 12 curriculum.  It is now incumbent upon the incoming Administration to invest substantially more in improving the quality of basic education especially in the countryside, to transform the demographic dividend into the veritable economic treasure it should be in a planet of low fertility rates and rapidly ageing populations.

          We thank you for all these good things that your Administration has done for the Philippine economy.  We wish you the best and may God bless you and your future endeavors.  For comments, my email address is bernardo.villegas@uap.asia.