"Corruption, agricultural-sector weakness, inability to attract much foreign investment and chronic external trade imbalance"
"Corruption, agricultural-sector weakness, inability to attract much foreign investment and chronic external trade imbalance"
An annual GDP (gross domestic product) growth of 7-8 percent has long been the target of Philippine economic planners, and this target is embodied in the current national economic blueprint, the Philippine Development Plan 2017-2022. The nation's economic managers and their lieutenant dutifully project an annual GDP growth rate of 7-8 percent in their assessments and discussions of the near-term performance of this country's economy.
Unfortunately the 7-8 percent GDP growth target has been attained only on a quarterly basis; an annual GDP growth rate within the targeted range has yet to be achieved. Still, 7 percent quarterly GDP growth is indicative of ability to post annual growth of 7 percent or more.
Annual GDP growth of 7-8 percent will continue to elude the Philippine economy if certain policy and operational deficiencies are not corrected. These are the following:
Corruption. The worst critics of the administration of President Rodrigo Duterte claim that corruption within the government has never been as widespread or as pernicious as it is today. Whether or not this claim is true, there is no denying that governmental corruption today is virtually everywhere in the bureaucracy—even in departments and agencies that once were relatively upright—and involves amounts of money that once would have been considered incredibly large. One only has to mention the P6 billion worth of shabu that slipped through the Bureau of Customs last year and the multi-billion PhilHealth scam to accept the truth of critics' claim. The Filipino people long ago forgave President Duterte for his campaign promise to rid this country of “drugs, crime and corruption” within three months. As the Senate revelations about the 2020 GAA (General Appropriations Act) have shown, corruption is by no means a monopoly of the Executive Department. The Duterte administration has to do a much better job of curbing corruption if the resources required by 7-8 GDP growth are not to leak away unto unholy pockets.
Agriculture. It is said that a chain is only as strong as its weakest link. This statement is highly applicable to the Philippines. This country is less than strong because its agricultural sector is weak. Once the backbone of the Philippine economy, accounting at its peak for around 80 percent of this country's GDP and its labor force, Philippine agricultural production is down to around 21 percent of GDP and employment is the nation's farms is a far smaller percentage of the national labor force. The pain generated by the Rice Tarriffication Act, the steady rise in imports of sugar and the coconut industry's continuing loss of world market share exemplify the steady decline in the position of the agricultural sector in the Philippine economy. Over the decades successive governments' attitude to the agricultural sector has largely been one of lip service; that must change, if 7-8 percent annual GDP growth growth is ever to be achieved.
Foreign Direct Investment. FDI (foreign direct investment) is an essential source of resources for a developing economy's transformation and growth. FDI is valuable to a developing economy not only for the foreign exchange that it brings in but also for the technology that it introduces and the export markets that it creates. The record shows that for decades, the Philippines has been one of the lowest Southeast Asian represents of FDI, receiving for less that countries like Vietnam and Thailand. This country needs to do a better job of attracting FDI because the alternative is foreign borrowings, which increases the nation's exposure to foreign exchange risk and the worsening of the foreign-debt-to-GDP ratio. Obviously the best way to start a more-FDI program is to generally improve the tone of this country's relations with the world. Another major way is to make the framing and enforcement of economic policies more stable and less politics-driven.
Export-oriented production is essential to a developing country because it creates jobs and generates incomes while bringing in foreign exchange. Unfortunately, the history of Philippine economic development has not had an orientation towards a .broad-based merchandise export trade. From the Commonwealth era to the 1960s this country's export trade consisted almost entirely of unprocessed and semi-processed commodities—copra and coconut oil, logs and lumber, sugar, gold copper concentrate and chromite ore—and thereafter the advent of the Computer Age and negative changes in domestic and foreign policies affecting Philippine commodity exports gradually brought about a shift in the composition of Philippine export trade toward electronic products, especially semi-conductors. Exports of electronic products currently account for around 52 percent of total exports. With no substantial broadening of the export base having taken place, and with the higher import requirements of intensified economic growth, the current account of the BOP (balance of payments) has in recent years had to absorb in economies trade deficits. The 2019 deficit will likely reach $42 billion.
The problems that have been discussed here—pervasiveness of corruption, agricultural-sector weakness, inability to attract much foreign investment and chronic external trade imbalance—have shown themselves to be highly detrimental to the growth and stability of the Philippine economy. Until they shall have been effectively addressed, annual GDP growth of 7-8 percent will remain an elusive target.