Overtaken
FIRST PERSON - Alex Magno (The Philippine Star) - October 20, 2020 - 12:00am

It finally happened. Vietnam has overtaken us in the development race.

According to a post by Austin Ong, program manager of the Integrated Development Studies Institute, the IMF projects Vietnam’s per capita income will rise to $3,500 this year. That compares with the Philippines’ per capita income of $3,380.

Vietnam has a population of 90 million against our population of about 110 million. She is the only other country in our part of the world, apart from China, to avoid economic contraction this year.

The reason Vietnam’s economy continues to expand this year (while ours is expected to contract by as much as 8 percent) is her decisive and overwhelming response to the pandemic. Ahead of any other country, except China, Vietnam quickly enforced public health controls and even more quickly set up over a hundred testing laboratories nationwide.

As a result, the country had very few infections and even fewer deaths. The last time a cluster of infections was detected in the city of Danang, Vietnamese authorities evacuated thousands of people to isolate a few dozen cases of infection.

That is akin to China’s response to the pandemic. Last week, the Chinese government ordered nine million people tested in one city after less than a dozen infections were detected. No further infections were found from that mass testing. According to the latest daily report of infections, about five people tested positive daily in all of China.

In 2019, Vietnam’s exports amounted to $300 billion. Philippine exports the same year amounted to only $70 billion.

Vietnam’s growth is attributable to massive investments in infrastructure and human capital over the past three decades. The country appears to have benefited from the trade frictions between China and the US. Many enterprises fleeing the effects of that trade war relocated to Vietnam.

The country also pursued pragmatic foreign and trade policies. Even as actual military skirmishes have broken out between her armed forces and Chinese troops, Vietnam continued mutually beneficial trade and investment exchanges with her neighbor. When the Noynoy Aquino administration asked Hanoi to join the Philippines in an international arbitration suit against China over our overlapping territorial claims, Vietnam refused.

This report about Vietnam’s per capita income overtaking ours brings to mind an incident that happened in the mid-nineties when I joined former president Fidel Ramos on a state visit to Hanoi.

With some free time on our hands, we strolled the streets of the Vietnamese capital. Out of the blue, Ramos asked me: When do you think Vietnam will overtake us?

At that time, bicycles were the main form of transportation in the quaint streets of Hanoi. We saw no banks on the streets we walked through. In the following years, Vietnam imported some of our lawyers to draw up business contracts for their mainly state-owned enterprises.

I told then President Ramos: Vietnam will never overtake us. That answer, we now know, was so wrong.

Cement imports

We import a lot of rice from Vietnam, with her strong agriculture base. We also import a lot of cement, from our neighbor.

Vietnamese cement is cheaper than what our producers put to market. But what she exports is often second grade products.

There is little we could do about the volume of cement imports from Vietnam. Under the terms of the ASEAN Free Trade Area, we cannot impose trade controls on commodity trade with our regional partners.

Recently, the Cement Manufacturers Association of the Philippines (CeMAP) called the attention of the Department of Trade and Industry (DTI) to the case of “Union V Super Strength” 40-kg bags of cement sold in several outlets. The bags indicate the product is made in the Philippines. The company that sells the brand, however, imports much of its cement from Vietnam.

The cement brand in question has no Philippine Standard (PS) mark on the bag. Neither does the product clearly indicate the Batch Identification Number and manufacturing date. These are requirements of the DTI to ensure the accountability of manufacturers for quality of products they sell to the local market.

But DTI regulations also allow bagging facilities that have secured a PS license to label their products as made in the Philippines. Trade Secretary Ramon Lopez appears confounded by this loophole in regulations. He should order a review of the regulations in place.

This apparent loophole in regulations is not a small matter for local cement manufacturers. The local cement industry directly employs 42,000 workers and creates 125,000 more jobs through the value chain. The industry has sales of about P155 billion annually. This is about 1 percent of the country’s GDP.

Along with other manufacturers, the local cement industry faces challenges given the contraction experienced by our economy during this pandemic year. Our manufacturers are encouraged by government’s campaign to buy local to help our enterprises survive and keep our workers employed.

But if there are loopholes in government’s labeling regulations, local manufacturers will be prone to dumping of products made in neighboring countries but repackaged as locally made.

Our cement manufacturing industry is on a path of growth. By 2030, it is estimated the local cement industry will directly or indirectly employ 400,000 workers. CeMAP estimates the sector pays about P24 billion in corporate and individual income taxes.

In a word, government too has a stake in the health of our cement manufacturing industry. In addition, our trade regulators have an obligation to properly inform our consumers of the true origins and content of the products sold in the domestic market.

IMF VIETNAM
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