Bernardo M. Villegas
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Time To Be Cautiously Optimistic (Part 2)

          Another crisis that has been turned into an opportunity during these difficult times of the pandemic concerns the way the labor force is more aware of the need for educational and training programs that can more quickly equip them with employable skills.  More than two million students have failed to enroll in formal educational courses during the academic year because of loss of income.  There is a proliferation, though, of short courses, training programs (including those sponsored by business enterprises for their own employees), webinars and other ways to upskill, reskill  and retool workers for the rapidly changing work environment in the New Reality.  To my mind, these developments can partly address   the serious mismatch between what are being produced by our formal educational institutions and the actual demand for specific skills in the workplace.  It has been ironical that, despite an abundance of young manpower, there is an acute shortage of construction workers for the Build, Build, Build program of both the public and private sectors.  The pandemic has been some kind of cold shower waking up both parents and the youth to the harsh reality that a college diploma is not a guarantee to employability and that they have to get rid of their bias against blue collar work.  The pandemic is also getting workers at all levels (including the managers and executives themselves) to quickly upgrade their digital skills or perish.

         Another blessing in disguise to celebrate, despite the continuing poor prospects for the economy in the next twelve to eighteen months, is the heightened awareness among people at all economic levels about the importance of hygiene, sanitation and physical fitness to strengthen immunity against diseases.  Especially since the health experts are telling us that COVID-19 has already become endemic and that it will be with us for a long time (together with its many variants) even after most of us have been vaccinated, the practices of frequent washing of hands, social distancing and even wearing of face masks when in crowded places will redound to  the over-all health of the population.  These more permanent habits will, of course, benefit the health and wellness industry which can be broad enough to include not only pharmaceutical products—both curative and preventive—but a whole range of  sports equipment (including bicycles) such as those being sold in the humongous store at Tiendecita called Decathlon.  Even fashion products like Nike and Adidas can now be marketed as immunity-boosting equipment.

         These products and services are reasons for cautious optimism even if we cannot expect a strong recovery in the next year or so.  On a longer-term horizon, however, I am aggressively optimistic, as I have written before in these columns.  Starting 2023, Philippine GDP can start growing at 8 to 10 percent as  the economy takes advantage, not only of the low base from which to grow, but from the strong fundamentals that cannot be wiped out even by the most virulent pandemic.  These fundamentals are our young, growing and English speaking population, which in a fully recovered global economy, can generate any where from 15 to 20 percent of our GDP in the form of $40 billion or more foreign exchange remittances from our OFWs who will be in great demand in the developed countries as they try to cope with their serious demographic crisis.  In addition, this demographic dividend will also be a great advantage in the BPO-IT industry as the large enterprises in the developed countries of the world will have a strong motivation to outsource more of their business services as they struggle to recover from the huge losses that they incurred during the pandemic.  The manpower for these sectors—OFWs and BPO-IT— already exist even if there is a serious threat that those who were below 15 years of age during the pandemic might have suffered from poor nutrition, insufficient education and mental health problems. If our Government heeds the warning about this very real problem that can hurt the quality of our manpower five to ten years from now and invest more aggressively in education and health—in partnership with the private educational sector—we have time enough to prevent the quality deterioration of our manpower in the next decade or so.

         The young and growing population is also a strong foundation of a huge domestic market in which at least 80 percent of the 110 or more million  consumers will be increasingly transitioning from low-middle income to upper-middle income and thus constitute a very attractive market for both local and foreign investors.  It may take a while before the Philippines can be a major exporting country but our domestic market can be large enough to support growth rates of 8 to 10 percent for at least two decades.   No matter how optimistic I want to be, I don’t see the Philippines becoming a major exporter of manufactured products.  Our comparative advantage is in the export of services (which include the OFWs).  If we are able to put together an effective plan to significantly improve the productivity of our agricultural sector, especially in the production of high-value crops such as fruits and vegetables, we still have a chance to follow the footsteps of Thailand and Vietnam in becoming a major exporter of high-value agricultural products.

         I am also aggressively optimistic about our tourism sector.  In the next three to five years, the engine of growth will be domestic tourism with 70 million or  more of our own people being the first tourists in their own country.  Once lockdowns have become a rarity and Filipinos can travel more freely from one province to another and from one island to another,  we shall experience a tourism boom.  Such a happy event will be strongly supported by the Build Build Build program of the present and future governments.  With better super highways, toll roads, railways, seaports, and airports, the Filipinos themselves will be the first to once again fill the hotels, beach resorts, restaurants and other tourism facilities of the country.  Four to five years from now, we can see the revival of international tourism since the Philippines has some of the best tourism attractions for our rich neighbours from Northeast Asia.  I see hordes of tourists coming from China, South Korea, Japan, and Taiwan once the world has put the pandemic under reasonable control.  Palawan has been declared by an international Tourism and Travel magazine as the best island resort in the world.  There are hundreds of other islands in our Archipelago that can closely compare with Palawan.  As long as we persevere in improving access to these islands through more modern airports (as we already have in Mactan and Panglao, Bohol), then tourism will be another major engine of growth of both income and employment, partly solving the problem of rural poverty since these tourism destinations are mostly in rural regions.

         Over a longer-time horizon, I need not be cautiously optimistic as regards GDP growth.  I remind myself, however, that GDP growth (even of 8 to 10 percent) is not the end all of and be all of integral human development.  I can only be optimistic about our bringing  our still very high poverty incidence to single-digit levels of 1 to 4 percent once I see the whole of Philippine society focusing on rural and agricultural development.  I want to see the Government continue relentlessly in providing our small farmers with all the support they need in infrastructures and services, including a restructuring of the agrarian reform program to allow the consolidation of the fragmented farms so that the farmers—together with corporate investors—can shift from low-value crops to higher-value ones like coffee, cacao, palm oil, rubber, and fruit trees—employing such models as nucleus estate farming as in Malaysia; cooperative farming as in Taiwan or the Netherlands; and corporative farming as has been tried by some enterprises involved in the production of high-value products from coconut such as coconut water, coconut milk, virgin coconut oil and many others.  For comments, my email address is