The textbook measurement of a country’s productivity is C + I + G, where C stands for consumption, I for investments and G for government spending.
In the Philippines, what has fuelled our economic growth over the last several years has been high consumer spending, principally because the main drivers of our economy have been our overseas Filipino workers who religiously send financial support to their loved ones here. In the past 10 years or so, the phenomenal growth of the business process outsourcing industry has also served us well.
The OFW-supported families are mostly from the poor and low middle-class sectors. Once they get their life support from their toiling relative abroad, tend to indulge in heavy consumption. They eat better, go to better schools, go shopping at those ever-proliferating malls, even put up houses which in turn fuel the real estate and construction boom.
The BPOs employ mostly young people, whose propensity to consume in turn fuel the service sectors—food, malls, sports and fitness outfits, even domestic travel.
But then, the OFWs and BPOs are vulnerable sectors to external events, be they war and conflict (as in the Middle East), or a wave of protectionism in the client countries, the immediate example of which is Donald Trump.
We cannot go on being a country providing services to the rest of humanity, or servicing the needs of the rich whose progeny disdain certain kinds of work. That makes us too vulnerable to externalities.
We have to develop internal strength in our economy. And going back to the classic formula of C + I + G, we cannot forever depend on high consumer spending to fuel our growth.
That is where I comes in. Investments, whether sourced from domestic savings, or from foreign direct investments (not the hot money coming from portfolio investments that move currency in and out depending on instant profitability), is what we need most.
We have a very low savings level. Because many live on a hand-to-mouth existence (the D and E sectors), and there is a very small real middle class (the C sector), low savings means less source of capital for investment purposes. Ours is a case of a huge population with very little savings per capita. Worse, this huge population creates great stress on needed social services, such as public health and education which perforce government has to subsidize.
This brings again the imperative of population management. The Roman Catholic Church always rails against population control, even if its own priests know full well how difficult it is to “discipline” sexual urges. They keep pointing to wealth concentration and corruption as demons which need to be exorcised first, so that government can provide for the ever increasing numbers. That’s another issue worth ten articles, and for now, all this writer will say is that Philippine priests are never good at arithmetic.
We have to compete with the whole developing world for a share of foreign direct investments. We have to make our economic environment friendly and inviting for foreign capital. Our 1987 Constitution restricts rather than invites. But even as the President and Congress have signaled intent to re-write the fundamental law, we have to act urgently to make it easy for those who are willing to invest given the current restrictions to come in.
It is in this regard that the economic zones created by special laws become so vital. Peza, Subic, Clark, BCDA, TIEZA, all these creations of law must work doubly hard to get those investors in.
But one dis-economy is the woeful state of our infrastructure. Public transport is dismal. It is as if, save for a flyover here and there, time has frozen on public transportation since Marcos left us. Agricultural infrastructure is just as bad. Irrigation serviced 1.4 million hectares in 1986. It now services 1.6 million hectares 31 years after the fall of Marcos. How’s that for pitifully minimal incrementalism? But look at how much government has budgeted for NIA in all these 31 years, and weep at the inefficiency. We need roads, bridges, ports, workable airports, railroads to link island with island, farms with markets, countryside to cities. Not to mention interconnectivity and communication.
We have to catch up, and fast, because foreign direct investments, even timid domestic capital, require good infrastructure as conditio sine qua non.
That’s where the third component of national productivity, G or government spending comes in.
But G is a function of ways and means, that is, state revenue and public debt.
But one is also a function of the other. Debt is sustainable only if the wherewithal to pay is available, and that means, state revenues must have the ability to generate debt payments or servicing.
That is why the Duterte economic managers are asking the public through Congress (and media) to understand why tax reform is necessary. No (temporary) pain, no gain, as I titled an article weeks ago. In the end, as the economy grows, people will realize how they contributed to such growth because they paid the right amount of taxes, just as they will realize how economic opportunities have meanwhile benefited the quality of their lives.
Duterte’s boldly independent foreign policy is producing results. China and Japan are opening up their financial vaults to fund vital infrastructure. Imagine if we hewed close to “mama” America, and then got Trump in return?
But all these opportunities need a concerted national effort, an energized bureaucracy which has to work doubly hard, cut the Gordian knots in the bureaucratic maze, and be driven in pursuit of quantum leaps in the national economy.
President Duterte, for all his long-winded speechifying, knows where we must go, and how to get there. No president in contemporary history has moved as fast and as purposive as the man from Davao in forgotten Mindanao. He is racing against time, and he wants the nation and the institutions of societal order to keep in step.
Whether it is to ride out the external storms happening all around us, or whether it is to finally take-off a laggard economy incapable of sustaining the needs of a huge and growing population, we must not lose the opportunity we now have.
Chinoys in this country used to say—the Philippines is a land of opportunity. It rains quite often, but when the rains fall, the earth swallows the water fast. So to prosper, one must always be ready. When the rains of opportunity fall, be sure you have a huge basin to catch your share of the water, else it falls to the earth and is gone.
If we only had such an ethic.