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Business

Rebuilding the economy

EYES WIDE OPEN - Iris Gonzales - The Philippine Star

Blood clots, brain fog, heart palpitations, damage to the kidney and lungs. These are just some of the damage that COVID-19 can do to one’s body, and the list is cruel as it is varied. The damage can take a while to heal or can even be permanent for others, experts have said.

A fellow journalist, who recovered from COVID-19 months ago, has yet to regain his pre-COVID-19 lung capacity. Before, he could run an average of 10 kilometers a day, but can only do half of that now, he told me.

COVID-19’s pestilence is the perfect metaphor to the damage this global pandemic will leave on our now fragile economy. In some areas, the damage may never be undone; some sectors may never recover or just collapse altogether, much like a COVID-19-infected body. Factories, malls, and brick-and-mortar stores have yet to run at full capacity again; some corporates and conglomerates are already buried in debt.

As the country returns to strict lockdown from Aug. 6 to 20, the economy will lose at least P210 billion, Socioeconomic Planning Secretary Karl Chua said.

Lucky are those who can work from home, but not everyone can afford to do that. These lockdowns will be very difficult for those who need to go out everyday to eke out a living – the daily wage earners, contractual workers, and those living on hand-to-mouth existence.

The lockdown will increase the number of poor people by up to 177,000 and those without jobs by 444,000, Chua said.

How then can our economy recover?

For sure, affected sectors will need massive government support, but every peso in taxpayers’ money must be spent wisely.

In the short term, public spending on infrastructure and social assistance and better progress in the country’s COVID-19 vaccination drive will help the economy recover, the Asian Development Bank said.

Plans to strengthen labor market programs and assist in the recovery of badly-hit sectors, including agriculture and tourism, will further support a pickup in the economy.

But so many things can happen in between. We may face another variant. Will we see all 24 letters of the Greek alphabet? Only time will tell. Global vaccine supplies may tighten as every country races against time to vaccinate its people.

The government should, therefore, go beyond simply responding to COVID-19. It needs to plan how to rebuild the economy in the long term, to really strengthen it in the years to come.

Our authorities should note that it takes years to recover from a crisis, as what happened after World War II when it took the country decades to rise from the ashes.

In the aftermath of the Second World War, the Philippines was in shambles, nearly buried in the rubble. Buildings, bridges, roads were destroyed; cities were in chaos. Billions had to be invested to physically rebuild the country.

Only in the 1960s did the business climate improve. Foreign investors started to return.

Developing our own industries

Against this backdrop, it is important for the Philippines to develop its industries – new industries, if possible. We need new, bold and innovative ideas; we cannot just rely on the resilient BPO industry or the dollars sent by OFWs. As COVID-19 showed us, the lack of strong, local industries has made us vulnerable to external shocks.

Steel, petrochemical, cement and other large-scale industries in the country, planned during the Marcos era, collapsed for various reasons, including mismanagement and bankruptcy, while some – like cement ended up mostly foreign-dominated.

Our manufacturing and agricultural industries hardly developed. In fact, agriculture steadily declined, no thanks to smuggling, corruption, etc., while the growth of manufacturing remained muted.

The result of all of these is growing poverty and income inequality, which perennially hampered economic growth.

Attracting investments

We also need to create an environment conducive enough to attract more foreign direct investments (FDIs), especially at this time.

Last year, net FDI inflows to the Philippines declined by almost 25 percent to hit a five-year low of $6.54 billion from $8.67 billion in 2019.

The government also needs to encourage our local businesses to place bigger bets on the Philippines. Ironically, some local companies are turning to other countries for growth because, for some, like those in regulated businesses, the local environment is unpredictable and restrictive.

We cannot boost economic growth without investments, foreign or local.

For existing businesses, the government needs to provide industry-specific support and a strong recovery plan for each sector, including financing or government guarantees. Wage subsidies will help, too, especially for micro and small businesses.

It is also important to strengthen our healthcare and education systems to boost our human capital. Infrastructure spending is urgent, too, because quality infrastructure will have long-term positive effects on economic growth. Agriculture and food security should likewise be prioritized.

It’s not going to be a walk in the park, but, if the only response we know is imposing hard lockdowns, we may find ourselves back to where we are right here, right now, next year, the year after, and possibly every year for as long as COVID-19 is around.

But if we strive to rebuild our economy well, this long, dark night will one day be over and we will again see the first light of the morning.

 

 

Iris Gonzales’ email address is eyesgonzales@gmail.com. Follow her on Twitter @eyesgonzales. Column archives at eyesgonzales.

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