What went wrong and what can we do?

THE CORNER ORACLE - Andrew J. Masigan (The Philippine Star) - December 2, 2020 - 12:00am

From Bloomberg to CNBC, from the BBC to Al Jazeera, the Philippines is spoken of in a negative light after recording the most severe economic contraction in ASEAN and having one of the poorest prospects for recovery in the world. We have also earned the infamy of suffering the highest caseload of COVID-19 in the region (relative to population) despite imposing the world’s longest continuous lockdown.

In one fell swoop, we are again spoken of as Asia’s sick man due to government’s heavy-handed but marginally effective anti-virus response and a stimulus fund too small to mend our battered economy. It’s unfortunate how things spiraled down so quickly due to mismanagement.

So where did things go wrong? A combination of past mistakes and wrong judgement calls are to blame.

Among past mistakes is government’s underinvestment in the medical sector – this is something that went on for decades. As a result, our healthcare capacity has become acutely  insufficient to support our ever growing population and the level of destitute among us. Our healthcare infrastructure (eg. medical laboratories and public hospitals) were left to decay whilst our healthcare professionals were given neither the professional nor personal support they needed. We were in no position to cope with the casualties when the pandemic struck.

At the height of the virus spread in China, the Duterte government opted not to impose a travel ban on Chinese visitors as our neighbors did. They preferred not to offend the “feelings” of the Chinese than protect the welfare of the Filipino – a decision that carried dire consequences. Just as we feared, our first two COVID cases came from a Chinese couple who visited the country last January. The man eventually died and the Philippines became the first country outside China to record a confirmed death from the disease. By March, the virus had spread across the country by the thousands.

While most governments in the region worked quickly to boost their medical capacities and intensify testing and tracing, ours only began to act in earnest after the ECQ. In other words, our government started late, moved slowly and spent too little to mitigate the contagion.

The militaristic lock-down imposed by government was meant to be the panacea to prevent the virus spread. Unfortunately, it failed to deliver its desired outcome due to the failure to swiftly implement a technology driven track-and-trace program. Testing levels were also very low. In hindsight, government should have made testing more affordable by granting subsidies for test kits and RT-PCR equipment. An RT-PCR tests cost P5,000 here while it cost only P350 in India.

During the ECQ, government failed to provide financial amelioration early enough for those who live on a hand-to-mouth basis. This forced many to go out to hustle for income.

The excessive restrictions and failure to ease them in a timely manner backfired as it destroyed many parts of the economy. Nearly a third of all MSMEs permanently closed.

As the saying goes, those who do not learn from their mistakes are destined to repeat them. Hence, once and for all, we must work to improve our medical infrastructure and get our economic house in order. A team of experts, including former NEDA secretary Ernesto Pernia, provides sensible recommendations.

Fundamentally, government should stop being averse in acquiring more debt simply to preserve our credit rating score. It must spend more in the sectors that matter. This includes the continued fortification of our healthcare capacities, improving the working conditions of medical frontliners, providing financial lifelines to MSMEs and bolstering social amelioration for the displaced.

To repair the economy, government must fast track the infrastructure program to create a pump-priming effect. Infrastructure spending was still down by 33 percent as of the third quarter. Simultaneously, it must aggressively entertain as many unsolicited proposals as possible. Simply put, infrastructure spending must operate on all cylinders to pick up the slack. This is no time to nitpick or allow vested interest to impede projects.

Foreign direct investments, especially companies leaving China, should provide the financial cushion we need to minimize the budget deficit. We must do all we can attract them. Apart from reaching out to targeted companies, we must assure them of policy stability as far as our tax regime is concerned.  Hence, the CREATE bill must be passed with the caveat that new and existing investors can enjoy a corporate income tax rate that is regionally competitive. Government’s passive and sometimes antagonistic attitude towards foreign investors (as if there was beeline of them) must change.

To make our investment climate more attractive for foreign capital, we recommend the immediate passage of the Amended Foreign Investment Act, Retail Trade Liberalization, Public Services Act and the National Land Use Act.

Statistics show that approximately 300,000 babies will be born on the back of the lockdown, which represents a 17.5 percent increase from normal birthrates. While every life counts, the weight of our population puts a strain on government’s ability to provide proper healthcare and education. Many of our youth are victims of stunted growth due to lack of infant nutrition. This is why government must put politics aside and fully implement the Responsible Parenthood and Reproductive Health Law and adequately fund the National Program on Population and Family Planning.

Tourism accounts for 12.7 percent of GDP and will take at least two years to recover. The authorities will do well to find new sources of income to augment this sector. The Philippines has a natural competitive advantage in the knowledge and information technology and this should be developed to its maximum potential. However, we need to climb the value chain beyond the basics. Hence, we recommend a renewed focus on Science and Technology (S&T) research. The Philippines spends just .16 percent of GDP on S&T as compared to the global average of one percent. S&T will be a $1.1-trillion business by 2027 and we must secure our fair share of this market. It all starts with upskilling our people.

For the first time many years, government, the private sector and civil society are cooperating to beat the pandemic. We should not squander this sense of bayanihan. This is the golden opportunity to re-shape our future and fix the laws that have impeded our growth for decades. Just like Japan and Germany did after the World War, we too can rise from the ravages and become a stronger nation.

 

 

Email: andrew_rs6@yahoo.com. Follow him on Twitter @aj_masigan

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