Bernardo M. Villegas
Recent Articles



Rebalancing Strategy
published: Mar 31, 2017



Articles  >> more topics
President Duterte Is Not Socialist (Part 2)

           Over at least the last forty years of tracking and forecasting economic developments in the Philippines, I have come to know many of the individuals who have been appointed to the Duterte Cabinet.  I have no serious doubts about their technical competence and integrity.  That is why it is not difficult for me to put on my usual hat as “prophet of boom.”  As I had frequently said in many economic briefings before the elections, the next President is fortunate that whatever he does, he can already be assured of a continuation of the 6 to 7 percent annual growth of GDP that has prevailed over the last four to five years.  Among the guaranteed engines of growth on which he can depend are close to $30 billion of remittances coming from more than 10 million OFWs (growing annually at 3 to 5 percent) and the $25 billion of earnings of the IT-BMP sector (growing at 15 to 18 percent).  These earnings in the hands of over 100 million people are stimulating a consumption-led growth of the economy, not the least of which results from some 40 million Filipinos traveling all over the Archipelago as domestic tourists.  With a very qualified economic team, the next Administration can be expected to improve on the implementation of much needed infrastructure projects (at least 5 percent of GDP) and the delivery of social services to the poor.  I can safely predict that in the next six years, we shall see GDP growth averaging 8 to 10 percent yearly (matching those of India, Myanmar and Sri Lanka)  and the poverty incidence being cut from its present 25 percent to less than 10 percent. Unlike Brazil and Russia, the Philippines will give a very good name to emerging markets.

          Under the Duterte Administration, I foresee a higher growth of the agricultural sector on the basis of a more productive use of land as the small farmers that have been the beneficiaries of the first phase of the Comprehensive Agrarian Reform Program are finally endowed with farm-to-market roads, irrigation systems, post-harvest facilities and other rural infrastructures that have been denied them in the past.  With the expected focus on Mindanao as the primary food producing region of the country, the very successful models of bananas and pineapples can be applied to many other high-value crops, such as cacao, coffee, mangoes, rubber, palm oil through the adoption of nucleus estate or cooperative farming which can lead to the consolidation of land to attain economies of scale.  A more enlightened approach to agrarian reform will permit the leasing of land by the small owners to those who can make more productive use of them.   As an alternative to the contractualization of labor, the increasing role of workers’ cooperatives in the plantations will address the problem of seasonal work such as planting and harvesting.  As is already being done by workers’ cooperatives like AsiaPro, farm workers are full-time members of cooperatives that employ them twelve months a year and provide them with all the SSS and other social benefits.  It is the co-operative that fields them from one seasonal work to another.  In fact, this model that originated in the banana and pineapple plantations of Mindanao is now spreading to urban areas in such sectors as fast food restaurants and retail stores.

          One clear benefit of having a President who comes from the heart of Mindanao is that the more progressive practices of the successful plantations in this second largest island of the Archipelago can be transferred, with some adaptations, to the agricultural activities in Luzon and the Visayas especially in such crops as sugar, corn, rice and coconut.  I expect the vast experiences of Secretary of Finance Carlos Dominguez (who was Secretary of Agriculture in the Cory Administration) to positively influence decisions as regards the more progressive and productive approaches to agrarian reform in the coming years.   Secretary Dominguez is especially qualified, having been a banker himself, to address the long-term financing needs of agribusiness projects.  We have to resist the leftist tendencies to focus on mere land redistribution without taking into account the productivity of the land.  As Dr. Raul Fabella, National Scientist in Economics, has amply demonstrated in his scholarly works, the CARP only increased the number of landed poor.  We cannot repeat the same mistake.

          It was also symbolic that the first Ambassadors to greet President Duterte after he was elected were the Chinese and the Japanese Ambassadors.  As President Duterte adopts a less confrontational stance as regards China than the previous Administration,  the Philippines can take advantage of the increasing demand of the close to 400 million middle income Chinese for high value agribusiness products, especially from Mindanao.  The Philippines is already one of the largest exporters of bananas to China.  We should diversify these exports to more fruits, vegetables and aquaculture products.  These opportunities make it even more necessary to improve the productivity of the agricultural resources of Mindanao, especially those in the coconut regions and the thousands of hectares of denuded forests.  I suggest that the President should encourage agribusiness trade missions to China of entrepreneurs from Davao, Cagayan de Oro, General Santos and other agribusiness and fisheries regions of the Island.  The President with his economic team can also convince the Japanese that there will be sufficient peace in Mindanao for it to attract the numerous Japanese manufacturing enterprises that are relocating both from Japan and China in search of more competitive labor.  The next decade or so will see a renaissance of manufacturing in the Philippines.  With a greater supply of electricity and a reduction of crime and terrorist activities in the island, Mindanao could also be rapidly industrialized under the new Administration. Agriculture and services alone cannot address the problem of unemployment and underemployment.  Manufacturing is essential.  To help in the industrialization of Mindanao, infrastructure development should go beyond road construction and should include the development of railway systems among the business centers such as Davao, Cagayan de Oro, General Santos, and other cities.

            A more peaceful environment can also augur well for a larger expansion of the IT-BPM sector in the island of Mindanao.  The excellent universities in Davao, CDO, Iligan, Zamboanga, and other educational centers will provide the needed human resources for Business Process and Knowledge Process Outsourcing enterprises.  The Philippines is still benefiting from the demographic dividend of a young, growing and English speaking population that confers on it a distinct competitive advantage in IT-enabled services.  It would be tragic if a mistaken belief in population control as a means of addressing poverty will lead to the demographic woes of countries like Singapore, Thailand and China that are now regretting having implemented population control programs that have shrunk their labor force and have increased the number of ageing persons who are now a drag on future growth.  We cannot afford to age before becoming rich as is already happening to some developing countries today. For economic reasons, the President should reconsider his strong support for the RH Law which will only destroy the major competitive advantage of the Philippines in a rapidly ageing world.  For comments, my email address is bernardo.vilegas@uap.asia.