February 25, 2013
We attended the economic symposium, “The Philippine Economy: Security, Stability, Sustainability” last February 11, 2013 in UST. It was a good symposium with three main speakers talking about the Philippine economy. The following are some of the highlights of the symposium.
- Services sector dominates 59% of GDP
- Philippines needs to sustain high GDP growth rate (6-7%) for more than a decade to become a tiger economy
- Aquino administration’s curb on corruption ignited investor confidence and investments within and into the country
- Agricultural/Fisheries and Industrial Sectors are neglected
- BPO and tourism to continue being growth drivers
- OFW remittances (USD20 bn annually) make up for low FDIs (USD1.5 bn compared to USD8 bn plus to our neighbors from Thailand to Singapore)
- Low interest rate environment to prevail
What is striking about our economy is that we skipped the agri and industrial part of economic development heading straight towards services. In the usual route of economic development, agri is first then, industrial, services and then social/cultural development.
South Korea took this path. After the North and South Korean war of the 50s, South Korea was one of the poorest countries in the world. Its agri sector supported local needs but was not enough to trade to the world. What sparked South Korea’s economic development was an export-oriented labor-driven economy. From the 60s to 90s, South Korea became known for building ships, cars and armaments. Its banking sector flourished as incomes and economic activity rose. Now, South Korea is in the age of social and cultural development. Its movies such as “My Wife is a Gangster”, “Old Boy”, the monster movie “The Host” and some Korean horror movies (“A Tale of Two Sisters”, “Phone”) broke into the world stage followed by K-Pop and now Psy’s ever-addictive “Gangnam Style”.
Now, one group of economists would say that the Philippines took a bad path skipping agri and industrial towards economic development. Services cannot sustain growth alone despite the flow of OFW remittances.
The other group which includes us says we’ll take anything that would spur growth. In this case BPO and tourism. Those two practically shielded us from the effects of the global financial crisis. As export-oriented Asian economies became adversely affected by the US and European economies, the Philippines prospered because it had low-cost BPO services which the US likes.
We agree Services cannot sustain high GDP growth alone in the long term. What we see is a resurgence of agri and then industrial in the long term. The Philippines has rich natural resources that cannot be ignored. Do you know that a kilo of glass eel from the Sibuyan Islands is PHP60,000 in the world market? That’s USD1,500 per kilo. Madonna inadvertently caused the demand for coconut water to spike up when she said it’s a big part of her diet. Looking at her in her age now and that great performance from the super bowl music video with Nicki Minaj, it seems like it’s water from the fountain of youth. Where can we get lots of coconut water? Yes, here, outside of the BPO office in the countryside where economic development will flourish in the future. There’s more: dragon-fruit, gold, and others.
For industrial, Japan has increased its FDIs into the Philippines. Japan is a major trading partner contributing 4% of our GDP. Fact is, the Philippines has a great location in terms of logistics, and our neighbor from the rising sun has re-discovered this.
The future looks bright. What would mess this up? Politicians. It’s ok to skip agri and industry but not genuine love and labor for country.
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