Wednesday, June 20, 2018
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No Free Lunch

Toward high-productivity services

In the mid-1990s, the Ramos administration defined several “pole-vaulting strategies” as rallying points to harness our inherent strengths into a focused agenda for rapid economic growth and jobs generation. These included turning the country into Asia’s “Shopping Center,” “Medical Center,” “Entertainment Capital” and “Knowledge Center.” Most of these identified growth poles were in the services sector, which by then had overshadowed agriculture and industry in terms of share in the economy’s output. The term “pole-vaulting” was a reference to how we seemingly bypassed an industrialization phase, by proceeding from an agriculture-dominated economy straight to services sector dominance. Economist Raul Fabella calls it development progeria (premature aging), and for most analysts now, we didn’t bypass industrialization; we missed it. The issue is that our services sector is marked by a dichotomy of a large low-productivity segment based mostly in the informal sector, and a high-productivity segment (dominated by finance and real estate) with relatively narrow benefits.

In the course of nearly two decades since then, those pole-vaulting goals were all but forgotten amid a succession of economic and political crises, both external and self-inflicted. These diverted us from the aggressive go-getter mode that marked the Ramos era into a defensive stabilization mode after the Asian crisis, and subsequently a political survival mode in most of the past decade. The tendency of succeeding administrations to abandon and even reverse programs of their predecessors further relegated those dreams to the wayside. Fortunately, our unique strengths, on which Ramos’ pole-vaulting goals were strategically premised, remain with us.

Becoming Asia’s new Shopping Center hinged then on the enactment of the Retail Trade Liberalization Law, paving the way for more modern retail systems and establishments. At the same time, overall trade liberalization reduced the cost of imported consumer goods for domestic shoppers and foreign tourists alike. Filipino tourists—arguably among the most astute shoppers in the world—know that shopping in Hong Kong or Singapore, erstwhile the region’s shopping capitals, is no longer as attractive as it used to be. Even in the late 1980s, when Singapore was still considered the place to shop, I recall being surprised by a young Singaporean woman who told me that she regularly visited Manila just to go shopping. On my further probing, she explained that she found Philippine-made clothes inexpensive but of good quality. More significantly, she found our designs to be superior—just one reason among others why the country has become a favored shopping destination for visitors.


Becoming a Medical Center for Asia has never been a long shot for us either, given the excellent reputation Filipino medical practitioners enjoy internationally. In some parts of the United States, for example, some of the acknowledged best specialists in their field are Filipino physicians. The strong demand for Filipino nurses in hospitals abroad is another clear testament to our edge in the medical field. With more investments in world-class hospitals for our world-class doctors and nurses to practice their profession in, we can attract numerous foreign patients to seek treatment here at a fraction of what it would cost in their home countries. Our faith healers had in fact already attracted droves of such “medical tourists” in the past, but we are even better placed to attract far more tourists for more legitimate medical procedures. Even as Singapore and Thailand have gone ahead in positioning themselves to be regional medical centers, we probably still possess the edge in quality and quantity of skilled medical practitioners, so all is not lost on that dream.

Our inherent advantage in becoming Asia’s Entertainment Capital needs little elaboration. We could easily be the Broadway of Asia, something that Singapore has also positioned itself for with a lot of help from—guess who?—talented Filipino artists. But we need the right investments in the required facilities complementing our rich artistic talent pool to achieve this goal. Lately, there emerged another aspect of our posturing as entertainment capital, not necessarily agreeable to everyone, but promising to be a growth driver nonetheless. Like it or not, the Philippines is now being bruited about as the next Macau, with gaming facilities from Resorts World and Solaire setting the tone for even more of such investments reportedly in the pipeline.

Similarly, the Philippines as Knowledge Center—in terms of higher education, information and communication technology (ICT), and business process management—is well within reach. We had in fact already been the region’s acknowledged education center before, having trained many of Southeast Asia’s leading scientists, especially in the agricultural sciences. Thousands of Asians find the Philippines a good place to learn English at relatively low cost. Our ICT professionals are legendary in their talent and creativity; and while not something to be particularly proud of, that some of the world’s most infamous computer viruses were made in the Philippines is a testament to this prowess. In business process outsourcing, the country now occupies top honors globally.

Even with manufacturing taking the limelight as we witness a seeming resumption of the industrialization we missed before, it’s also time to blow the dust off Ramos’ old pole-vaulting strategies as a way to boost our services sector into much higher productivity and more inclusive growth.


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