P-Noy and the economy

The claim is being made that it is wrong to call for P-Noy’s resignation and destabilize the country specially now that the economy is doing great. Is this correct?

Yes, the economy is doing great. A Bloomberg survey of economists shows they think the Philippines will be the second fastest-growing economy in the world this year, second only to China.

Yes, it is silly to destabilize our fast growing economy by adding a serious political risk into the equation. Why should we allow ambitions of old men among the Transformers and the Mitsubishops throw away a fast growing economy, something we had wanted all these years?

True, the high GDP growth rate is still far from inclusive but, that – together with the favorable international credit rating and our record setting stock market – all show a good amount of confidence in our economy we haven’t had in a long while. If we manage things right, all these could be the basis of an economy that finally lifts most of our people out of poverty.

No, it is wrong to say P-Noy was largely responsible for this favorable environment as some propagandists for the administration will have you believe. The contribution of P-Noy in this phenomenon of high trust among foreign investors is his perceived honesty.

Investors and economic analysts are right to see P-Noy as basically honest, a sharp contrast to some of his immediate predecessors. It is more pleasant to do business in a country where the leadership is not corrupt.

I asked Ruchir Sharma of Morgan Stanley when he called us a breakout nation in 2012, what got us in his list. Sharma thinks P-Noy’s focus on good governance and fighting corruption is the main attraction.

But Sharma emphasized we still need to work on economic reforms and maintain political stability. We still have to get those expressways and modern airports up faster or we won’t be able to sustain the current optimism. And that’s the tragedy of P-Noy… failure to deliver even one significant infrastructure project that’s not a carryover from the past administration.

According to Sharma, our so called favorable demographics mean nothing unless we educate our people to be productive participants in the economy. Yes, inclusion is important too, Sharma told me. We cannot just ride on OFW remittances and Call Centers.

So P-Noy’s honesty broke the ice for us, so to speak, in terms of gaining credibility among investors. But even in this honesty business, P-Noy is only partly successful. Somehow, he failed to enforce honesty at the level of his officials and the bureaucracy. It is still difficult to start a business, many entrepreneurs tell me, unless one came across.

Then too, if the talk in the business cocktail party circuit can be believed, some fairly senior officials are reputed to be pretty good business entrepreneurs on the side. They supposedly use friends as dummies to own interest in fairly large institutions from banks to luxury car dealerships. The Ombudsman will be very busy after 2016.

In a way, the economy is on auto pilot now, thanks to annual OFW remittances of $25 billion and the $15 billion that BPO businesses bring in each year. Our economy really has no way to go but up, thanks to the hard work of the Filipino people, no thanks to our leaders and the blood sucking elite they work for.

What I feel sad about are opportunities lost. My big disappointment with P-Noy is his failure to lead government in a massive infrastructure program to make doing business and earning a living easier. The congestion at NAIA, at the Manila ports and at EDSA all constricted economic growth. 

Imagine how much higher our GDP growth rate could have been if we had proper infrastructure. More tourists can come and spend and thus create more local jobs. Efficient airports and ports can result in more investments that can create more jobs because people, raw materials and products move easily.

 In any case, being seen as the world’s second most promising economy is meaningless with all the poverty still around us. There is still so much work to do that makes it pretty stupid to be waylaid by any move to force P-Noy to resign with less than 16 months left in his term.

Indeed, even the good news about our economy seems tentative. Respected UP economist Noel de Dios observed that recent trends only seem to be encouraging at first glance. “There is renewed interest in the country as an investment destination, manufacturing growth has been robust, and some important foreign investments have entered the country… ”

But Noel thinks “things look a lot less dramatic” in reality. Resurrecting manufacturing had been pointed out as the way to create most of the jobs that will employ our army of unemployed people. There are those who say manufacturing is starting to come back and point to a shortage of land inventory in the leading industrial parks as proof.

“Manufacturing’s share in GDP has barely risen – from 22.2 percent in 2010 to 23.2 percent in 2014. On the other hand, the employment share of manufacturing actually stagnated at 8.4 percent in the last five years, which is even lower than the 10 percent employment share a decade ago. But what about the high manufacturing growth we hear about? Doesn’t that matter?

“Math is cruel. For the share of manufacturing to grow, it must grow faster than the total itself. So, suppose the economy was growing at seven percent and we wanted to raise the output share of manufacturing by just one percentage point from 23-to 24-percent in one year. Manufacturing would then have to grow by almost 12 percent in that year -- which has never happened. Manufacturing value-added grew by an average of only 8 percent in the last five years, with no sign of accelerating.

“Even crueler algebra applies to employment. Total employment currently grows at 2.8 percent annually (about a million new workers added per year). To raise its share in employment from by just one percentage point – from 8.4 to 9.4 percent – manufacturing would have to expand employment by 15 per cent a year, i.e., add 5.6 million workers – an absurd proposition, since that would mean shrinking employment in the rest of the economy.”

Dr. de Dios pointed out too that keeping our manufacturing sector competitive can only get tougher.

“With the large and irreversible current-account surpluses piled up by overseas workers’ remittances and the still-increasing revenues from the service-industry BPOs, there is no obvious way to engineer a sustained currency undervaluation the way the Koreans, Taiwanese, and Chinese did.

“And given the country’s now-higher living standards and enhanced labor protection (relative to, say, some South Asian or African countries), there is little room to compete in the lowest-wage and least-skilled categories (e.g., garments and textiles). Finally, technology is also changing with the appearance of robotics and digital technology (e.g., 3-D printing and customization), making low-cost labor less crucial in production.”

I see the points made by Dr. de Dios that it is too early to start being smug just because our GDP growth last year was strong and there seems to be a resurrection of manufacturing. There is so much work to be done, right policies to be made.

And our attention cannot be diverted by efforts of the Transformers, the Mitsubishops and the radical left to destabilize the country and increase political risk.

Stop the nonsense of forcing P-Noy to resign. In the first place, only the clerico fascists and the communists are calling for it for ulterior motives. The rest of us just want to make sure the good news about our economy gets sustainable beyond 2016.

Seeing that happens should keep all of us busy. We do not have time for the childish antics of discredited old politicians, church leaders who have missed their spiritual calling and professional rally organizers which media, unfortunately, pays attention to.

But then again, unless P-Noy changes his attitude to allow him to do a buzzer beating last two minutes shot from across the court, he is finished. But that doesn’t mean we should scare investors and economic analysts by going outside the constitutional process to replace him.

The one year or so left is not too much time to wait. Besides, we still don’t have the right successors lining up to sustain our optimism. And that’s our current tragedy.

Boo Chanco’s e-mail address is [email protected]. Follow him on [email protected]

Yes, the economy is doing great. A Bloomberg survey of economists shows they think the Philippines will be the second fastest-growing economy in the world this year, second only to China.

Yes, it is silly to destabilize our fast growing economy by adding a serious political risk into the equation. Why should we allow ambitions of old men among the Transformers and the Mitsubishops throw away a fast growing economy, something we had wanted all these years?

True, the high GDP growth rate is still far from inclusive but, that – together with the favorable international credit rating and our record setting stock market – all show a good amount of confidence in our economy we haven’t had in a long while. If we manage things right, all these could be the basis of an economy that finally lifts most of our people out of poverty.

No, it is wrong to say P-Noy was largely responsible for this favorable environment as some propagandists for the administration will have you believe. The contribution of P-Noy in this phenomenon of high trust among foreign investors is his perceived honesty.

Investors and economic analysts are right to see P-Noy as basically honest, a sharp contrast to some of his immediate predecessors. It is more pleasant to do business in a country where the leadership is not corrupt.

I asked Ruchir Sharma of Morgan Stanley when he called us a breakout nation in 2012, what got us in his list. Sharma thinks P-Noy’s focus on good governance and fighting corruption is the main attraction.

But Sharma emphasized we still need to work on economic reforms and maintain political stability. We still have to get those expressways and modern airports up faster or we won’t be able to sustain the current optimism. And that’s the tragedy of P-Noy… failure to deliver even one significant infrastructure project that’s not a carryover from the past administration.

According to Sharma, our so called favorable demographics mean nothing unless we educate our people to be productive participants in the economy. Yes, inclusion is important too, Sharma told me. We cannot just ride on OFW remittances and Call Centers.

So P-Noy’s honesty broke the ice for us, so to speak, in terms of gaining credibility among investors. But even in this honesty business, P-Noy is only partly successful. Somehow, he failed to enforce honesty at the level of his officials and the bureaucracy. It is still difficult to start a business, many entrepreneurs tell me, unless one came across.

Then too, if the talk in the business cocktail party circuit can be believed, some fairly senior officials are reputed to be pretty good business entrepreneurs on the side. They supposedly use friends as dummies to own interest in fairly large institutions from banks to luxury car dealerships. The Ombudsman will be very busy after 2016.

In a way, the economy is on auto pilot now, thanks to annual OFW remittances of $25 billion and the $15 billion that BPO businesses bring in each year. Our economy really has no way to go but up, thanks to the hard work of the Filipino people, no thanks to our leaders and the blood sucking elite they work for.

What I feel sad about are opportunities lost. My big disappointment with P-Noy is his failure to lead government in a massive infrastructure program to make doing business and earning a living easier. The congestion at NAIA, at the Manila ports and at EDSA all constricted economic growth. 

Imagine how much higher our GDP growth rate could have been if we had proper infrastructure. More tourists can come and spend and thus create more local jobs. Efficient airports and ports can result in more investments that can create more jobs because people, raw materials and products move easily.

 In any case, being seen as the world’s second most promising economy is meaningless with all the poverty still around us. There is still so much work to do that makes it pretty stupid to be waylaid by any move to force P-Noy to resign with less than 16 months left in his term.

Indeed, even the good news about our economy seems tentative. Respected UP economist Noel de Dios observed that recent trends only seem to be encouraging at first glance. “There is renewed interest in the country as an investment destination, manufacturing growth has been robust, and some important foreign investments have entered the country… ”

But Noel thinks “things look a lot less dramatic” in reality. Resurrecting manufacturing had been pointed out as the way to create most of the jobs that will employ our army of unemployed people. There are those who say manufacturing is starting to come back and point to a shortage of land inventory in the leading industrial parks as proof.

“Manufacturing’s share in GDP has barely risen – from 22.2 percent in 2010 to 23.2 percent in 2014. On the other hand, the employment share of manufacturing actually stagnated at 8.4 percent in the last five years, which is even lower than the 10 percent employment share a decade ago. But what about the high manufacturing growth we hear about? Doesn’t that matter?

“Math is cruel. For the share of manufacturing to grow, it must grow faster than the total itself. So, suppose the economy was growing at seven percent and we wanted to raise the output share of manufacturing by just one percentage point from 23-to 24-percent in one year. Manufacturing would then have to grow by almost 12 percent in that year -- which has never happened. Manufacturing value-added grew by an average of only 8 percent in the last five years, with no sign of accelerating.

“Even crueler algebra applies to employment. Total employment currently grows at 2.8 percent annually (about a million new workers added per year). To raise its share in employment from by just one percentage point – from 8.4 to 9.4 percent – manufacturing would have to expand employment by 15 per cent a year, i.e., add 5.6 million workers – an absurd proposition, since that would mean shrinking employment in the rest of the economy.”

Dr. de Dios pointed out too that keeping our manufacturing sector competitive can only get tougher.

“With the large and irreversible current-account surpluses piled up by overseas workers’ remittances and the still-increasing revenues from the service-industry BPOs, there is no obvious way to engineer a sustained currency undervaluation the way the Koreans, Taiwanese, and Chinese did.

“And given the country’s now-higher living standards and enhanced labor protection (relative to, say, some South Asian or African countries), there is little room to compete in the lowest-wage and least-skilled categories (e.g., garments and textiles). Finally, technology is also changing with the appearance of robotics and digital technology (e.g., 3-D printing and customization), making low-cost labor less crucial in production.”

I see the points made by Dr. de Dios that it is too early to start being smug just because our GDP growth last year was strong and there seems to be a resurrection of manufacturing. There is so much work to be done, right policies to be made.

And our attention cannot be diverted by efforts of the Transformers, the Mitsubishops and the radical left to destabilize the country and increase political risk.

Stop the nonsense of forcing P-Noy to resign. In the first place, only the clerico fascists and the communists are calling for it for ulterior motives. The rest of us just want to make sure the good news about our economy gets sustainable beyond 2016.

Seeing that happens should keep all of us busy. We do not have time for the childish antics of discredited old politicians, church leaders who have missed their spiritual calling and professional rally organizers which media, unfortunately, pays attention to.

But then again, unless P-Noy changes his attitude to allow him to do a buzzer beating last two minutes shot from across the court, he is finished. But that doesn’t mean we should scare investors and economic analysts by going outside the constitutional process to replace him.

The one year or so left is not too much time to wait. Besides, we still don’t have the right successors lining up to sustain our optimism. And that’s our current tragedy.

Boo Chanco’s e-mail address is [email protected]. Follow him on [email protected]