One-trick pony
SHORTSIGHTEDNESS occasionally hobbles our nation. Maybe it’s because of our poverty, relative to some of our less myopic neighbors—like Singapore—who have displayed an amazing ability to orient their economies toward policies that would hold them in good stead for the next century, rather than the next national elections.
And every so often, we receive some good news that, while instantly gratifying, tend to push us deeper into our collective and comfortable myopia.
Take the latest data on the Philippines’ merchandise exports. The government recently reported that export numbers were again on the rise in the first two months of 2012, after a dismal showing last year when exports contracted for eight straight months due to a weak demand for electronics in the crisis-wracked North American and European markets (the ultimate destination of the iPads, iPhones, iPods, etc. that use the electronics parts we make here).
This is excellent economic news for the Philippines, especially since up to 60 percent of the goods we sell overseas is in the form of electronics components. What the latest numbers are telling us is that consumers in affluent countries are, once more, sufficiently confident to open their wallets and buy smartphones and tablets and other high-tech devices.
Indeed, as they say in mathematics, two points (the rising export figures in January and February 2012) make a line. But it takes three points to make a trend and at this point, it may be too early to tell whether the good news we’ve been told will persist for the rest of the year. Chances are, it will, and the Philippine economy is probably on its way to making last year’s dismal 3.7-percent growth a distant memory.
But what if it doesn’t? Whether or not these positive developments persist, shouldn’t we now be looking at solutions for that time down the road when the party music falters—and stops?
The numbers don’t lie. What the Philippines produces locally is skewed heavily toward the electronics industry, leaving the country highly vulnerable to economic shocks and supply chain disruptions overseas that invariably occur, like what we experienced last year.
To some degree, the Philippine economy is a one-trick pony where exports are concerned. Sure, we have other ways of keeping things running, like depending on remittances from overseas Filipino workers (a two-edged sword at times) or on government spending. But realistically speaking, we need a more predictable—and more reliable—pillar on which to anchor the Philippines’ hoped-for prosperity.
No less than the Asian Development Bank has pointed out this unfortunate situation, saying that the current export structure “makes the economy vulnerable to global electronics demand and to disrupted electronics production chains, as [what] happened in 2011.”
The root cause, according to the ADB, is that Philippine industry has “stagnated”—something that started in the 1980s when global manufacturing began moving to East and Southeast Asia but sidestepped the Philippines because of its political instability. And even as we became successful at the lower ends of semiconductor manufacturing in the 1990s, we have failed to develop and produce higher-value products, such as what our neighbors like Malaysia are now doing.
This is where the Aquino administration should step in by setting policies that would help the local manufacturing sector diversify (i.e., transfer some eggs to other baskets) and move up the value chain (i.e., make better eggs that we can sell at higher prices). The government has at its disposal a plethora of powers that can help orient resources toward the development of certain high-value manufacturing sectors while phasing out support for areas that have become inefficient, unproductive, or simply passé.
Because ultimately, how the administration runs our export-oriented economy will determine the long-term success or failure of its governance campaign. If it wants a corruption-free Philippines beyond 2016, it must help ensure that there are as few hungry stomachs as possible by the time the next presidential election comes around.
For reforms to take hold, the economy must keep running.
Easier said than done? Of course. But this administration takes pride in its ability to aim for the seemingly impossible, like slaying the giant dragon of corruption. Reforming the fundamental structure of the Philippine economy, with the enthusiastic help of the private sector, shouldn’t be an insurmountable problem.
