6.2%

There is reason to cheer. The official third quarter GDP growth rate is 6.2% –at the upper end of all the forecasts.

This is not an easy feat. We posted this growth rate against strong headwinds. The global economy is slowing down. The trade war and the uncertainties of Brexit are pulling back many economies.

During the first half of the year, we grew our economy by only 5.5%. This is due principally to the effect on public spending of the delay in the enactment of the 2019 national budget. We hope this does not happen again, whatever the games our politicians play.

In the third quarter, our economy recovered its stride. The “catch-up” spending plan our economic managers quickly put together appears to have delivered its desired effect. The uptick in growth is due principally to the surge in public spending. It is also due to the apparent recovery of our agriculture.

In order to push up this year’s growth rate to the psychologically important 6% level, the economy needs to grow 6.7% in the fourth quarter. Economic planning secretary Ernesto Pernia seems confident this is achievable.

Should we grow at 6% for the year, it is possible we could overtake China’s growth rate. The world’s second largest economy has been showing signs of slowing down principally because of the trade war.

China, burdened with an aging population, may never return to the extraordinary growth rate its posted in the past three decades. By contrast, the Philippines is just about to hit its “demographic sweet spot” with its very young workforce. We need to sustain growth at a fast clip to meet the expectations of the incoming generation of Filipinos.

Heavy public spending on modernizing our infrastructure is the key driver for our expansion. Spending on infra has the highest multiplier effects. It creates jobs, improves logistics efficiency in the domestic economy and opens numerous investment opportunities.

Over the medium term, we need to attract more investments to make the infrastructure spending worthwhile. To do so, we need to modernize our tax system and further improve on the ease of doing business. The Philippines jumping 29 places in the last Ease of Doing Business Report is welcome development.

By gradually shifting our development to investments-led growth, we will be able to achieve a more inclusive pattern of development. We will be able to create more productive jobs for our people.

The Duterte administration has committed to bring down the poverty rate to just 14% by 2022. That will be the most critical number we will hold it to.

Security policy

The MOA was signed, but the policy is not yet clear.

The MOA between the Armed Forces of the Philippines (AFP) and the Dito Telecomunity/ChinaTel consortium allows the telecommunications provider to set up towers in military camp. But that MOA, it seems, is subject to final approval by the Secretary of National Defense.

Nothing has been announced about that approval since the MOA was signed. Meanwhile, the third telco player is under time pressure to set up its system or face stiff fines. Building communications towers is way easier than haggling with neighborhood associations and local governments for the necessary permits.

The principal issue here is Beijing’s policy subordinating the activities of private firms to the requirements of national intelligence gathering. ChinaTel is a state-owned enterprise, making it particularly vulnerable to Beijing’s intelligence policy. This is the same issue that brought difficulty for the giant tech firm Huawei whose cutting edge 5G technology is being blocked in many countries.

While the transaction between the AFP and the Dito consortium might be a straight out commercial arrangement, many find the very thought of installing powerful communications equipment within our military camps disturbing.

Among those expressing opposition to the MOA is former party-list congressman Terry Ridon, who used to serve at the Information and Communications Technology Committee at the House. Today, he is affiliated with an NGO called Infrawatch PH.

No less than President Xi Jinping, says Ridon, once said: “Without cyber security, there is no national security.” This is taken to mean that all cyber and telecommunications activities of Chinese companies are expected to serve the security interests of the state. 

Because of the discomfort of US officials, for instance, the proposed submarine cable between Los Angeles and Hong Kong is being closely scrutinized by American intelligence agencies due to involvement of Chinese telcos in the project. The undertaking might even be cancelled. That will have implications on our own communications platform.

Distrust for Chinese technology companies is just as strong here. It is a challenge for ChinaTel’s ability to operate in the Philippine environment. That challenge could spell a costly delay in the much-touted emergence of a third telco player.

More and more voices, including those of senators, have joined the bandwagon opposing the MOA between the AFP and the Dito consortium. Spokesmen for the telco downplay ChinaTel’s role in the partnership, saying the Chinese firm is merely technology supplier.

To be sure, the partnership with ChinaTel is a source of strength for Dito Telecommunity. But because of deep-seated Filipino distrust for China, it is also a source of weakness.

The third major telco has a tight timeline to begin delivering services. Doubtless, it will want to set up its towers as quickly as possible. That is the consideration underlying the MOA with the AFP.

Should higher authority reject the MOA entered into by the AFP, the third telco’s rollout will be delayed.  The faster internet services expected by Filipino consumers might take longer.