Still one of Asia’s fastest (2)

Last week, I finished introducing the challenge that faces agriculture. It’s a sector that has been ignored for far too long by far too many presidents. The Philippines, with fertile soil and a tropical climate, should be a leader in growing produce. But it’s not, and it trails behind almost everyone.

The reasons are many and complex—too much for this column—but what happened to rice tells us much. It was mismanaged for decades, so the removal of the National Food Authority from the control of rice was a much-needed, much-overdue change that has resulted in some retail price reduction. But it’s still not enough, as cartelized middlemen and inadequate logistical services end up reducing the gains that could be achieved. The farmers have suffered unnecessarily because of this. I expect the new agriculture secretary will have this as a prime focus in 2020. He has to; Filipinos can’t live without rice. Sugar needs a similar opening to the market to force the efficiencies the sector has shied away from. The problem is, sugar needs plantations if it is to be world-competitive. And the ill-considered Comprehensive Agrarian Reform Program made that extremely difficult.

But giving farmers an adequate return will remain a problem, and keeping them on the land is a bigger one, as the youth seek more secure futures in the city. What could be a solution is to accumulate five-hectare lots into large, efficient plantations as the youth leave. And the young may well like this as it would give some revenue for nothing. But for that to occur in a contiguous area is not too likely. Changing the law would be a better solution.

The information technology business process management (IT-BPM) industry is facing formidable challenges due in large part to the slowdown in the voice segment as it approaches the natural growth of 4-5 percent in the talent pool, and as artificial intelligence (AI) begins to infiltrate the service even more rapidly. Other segments like health care information management, back offices and shared services will partly compensate for this slowdown.

Confronting the challenges facing IT-BPM involves support from the educational system in developing curricula oriented toward up-scaling IT skills and focusing on science, technology, engineering and mathematics (STEM) courses—not only boosting enrollment in these high-tech courses, but also changing them rapidly as the technology changes. We can’t continue to be shamelessly lowest and second-lowest in the Programme for International Student Assessment. More importantly, we need to encourage these graduates to join the IT-BPM industry to build a deeper talent pool.

AI is the real threat to much of what the Philippines is today. And transitioning to that will be the Philippines’ and the world’s biggest challenge. This brings to the fore the role of the Department of Information and Communications Technology (DICT) as the lead agency for the country’s future. And of the Anti Red-Tape Authority (Arta) on the business side. Apart from the holistic computerization of all government services, a major responsibility in itself that Arta has to address with the technical help of the DICT, there’s the need to transition the country into a world that will be unrecognizable. Many of today’s jobs and activities will no longer exist. New ones will be created. Adapting to this futuristic world will need imaginative, strong leadership. We are entering a revolution in the way societies are structured. Manufacturing is witnessing some revival, with strong performance during the past three to four years, supported by initiatives of a number of foreign companies to establish back-up factories against natural calamities and political upheavals in some of their areas of operation, and to enhance their global value chain. But the still unaddressed barriers to the country’s new industrial strategy limit its ability to tap sufficiently into this opportunity.

I’m worried that the decline in foreign investments last year (it was only $5.8 billion from January to October 2019 versus $8.6 billion in the same period in 2018, a 33-percent drop) could continue into this year. The uncertainty Congress has created through dithering with what our new tax regime should be has certainly turned many investors away. You just don’t put your money into something when you don’t know the tax bite you’ll be hit with. There’s also a need for firm assurance that the government will honor its contracts if the “Build, build, build” program is to keep up its pace. Contracts should be changed only if both parties agree, and the changes are seen as reasonable.

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