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Business

Why we are a mess

DEMAND AND SUPPLY - Boo Chanco - The Philippine Star

Junior is not to blame for the mess we are in right now. He has been in power for just a little over a quarter. The blame rests on all past presidents, including his father, for neglecting the key issues behind all the pain we are suffering now.

Investment banker Stephen CuUnjieng showed some numbers in a recent presentation to tell this long, sad story. Let us start with population growth.

In 1950, the year I was born, we were 18.6 million Filipinos. Today, 72 years later, we are 112 million or a 602 percent growth.

Let us compare Thailand. They were slightly more than us in 1950 at 20 million. Today, they are 70 million or a 350 percent growth.

For population density, there are 338 Filipinos per square kilometer, 40th most dense in the world. Thailand is 140, Vietnam is 296, Indonesia is 145 and Malaysia is 103.

Let us take GDP. Ours was $286/capita in 1960 and today it is $3549 or a 12.4x increase.

Compared to Thailand’s $101/capita in 1960, and today it is $7233. That’s a 71.8x increase.

China’s GDP per capita in 1960 was just $90. It is now $12,556 or a 139.5x increase.

India, the other very populous country, had a GDP per capita of $82 in1960 and now has $2,277 or 27.8x increase.

We became economic laggards in the region, squandering our lead. So, what do we do?

In his recent trip to Cambodia, Junior said the strongest appeal to investors, whether domestic or foreign, is the large domestic market we now have, thanks to a fertility rate that is still above the replacement of 2.1 percent.

Junior hasn’t been told that our birth rate has declined from 2.7 in 2017 to 1.9 this year, according to PSA figures. Filipinos are starting to realize it has become unaffordable to have a lot of children.

But Junior is not alone. My esteemed mentor, Dr. Bernie Villegas wrote last week that we will benefit from the advantages of a demographic dividend or a young, growing, English speaking population. He is dreaming of “an explosion of demand for consumer goods and services.”

Where will our people get the money to power this explosion of consumer demand? Mostly from OFWs and BPOs.

Today we have about 15 million OFWs and 1.5 million BPO workers. Because we don’t have a manufacturing sector that is a major exporter, we depend on OFWs and BPO workers for the dollars we need.

But can we forever send 10 percent of our population overseas so their families won’t starve at home? Will the host countries of our OFWs keep on hiring our workers?

Thanks to the declining quality of our educational system, our students tested last in a list of nations in terms of competency in math, science, and reading. That will make us miss the bus for the next set of BPO jobs.

As for English proficiency, Singapore has overtaken us as the most proficient in Asia. We are still second and Malaysia is third. That’s according to a Swedish education company that tested 2.1 million non-English speakers across 111 countries.

That may not seem too bad, but experience tells us that more and more Filipinos are now finding it difficult to communicate well in English. One senator admitted as much and urged floor discussions be done in Pilipino.

But even if the BPO-IT industry successfully adds one million more workers to their sector between now and 2028, as they claim they will, that hardly responds to the need for more jobs. We must generate at least a million new jobs a year.

Our economy is too dependent on consumption, but produces very little of the things we need, like food. We import more than we export and this explains why the peso is weak, our cost of living is high. Our situation is not sustainable.

Yet, government economists are fixated on a high GDP growth rate. We had that during the PNoy days, plus an investment grade credit rating, but none of those mattered for the common man. The rich only became richer. That partly explains the strong negative vibes generated by the Aquino name that brought us Duterte and Junior.

We have a problem of sectoral underperformance, Stevie observed. No one is addressing this problem because it is difficult and we have short planning horizons.

For starters, we must do something about our expensive and inadequate infrastructure. My example here is the Manila Subway project costing P500 billion to serve about 500,000 commuters daily.

It is a gold-plated prestige infrastructure project we cannot afford. Or put another way, there are more economic and cost-effective ways of moving people. The EDSA busway, for instance, can move a million people a day at less cost (P30 billion) and disturbance.

Stevie emphasized that in a high population country, industrialization has been the only mode to prosperity and full employment. We cannot go from agricultural to service economy with our population.

Our lack of manufacturing has led us to the imported inflation we now have.

Electricity demand is used by economists to measure a country’s industrial development. Our peak electricity demand is just 15,000 MW for 110 million of us. Vietnam’s 96 million consumes a peak demand of 56,000 MW. Thailand with its 70 million has a peak demand of 34,000 MW, and Malaysia has a peak demand of 19,000 MW for its 35.1 million people.

Perhaps we can promote tourism as if our lives depended on it. We have been named the world’s leading destination for tourism for the first time at the 29th World Tourism Awards in ceremonies held at Muscat, Oman a week ago.

Jojo Clemente who heads the Tourism Congress of the Philippines said tourism accounted for 12.7 percent of GDP in 2019, 5.7 million direct employment, and total revenues of about P3.7 trillion.

And then there is renewable energy. With our coal fired power plants approaching retirement, we must be ready with a sustainable alternative energy source.

So much to do. So little time. Yet, our politicians act as if times are normal. Besides, Filipinos are so resilient. This is why we are so messed up.

 

 

Boo Chanco’s email address is [email protected]. Follow him on Twitter @boochanco.

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