High time for summits
After four years of significantly improved economic performance, the gains we’ve made are not without threats and it’s certainly not the time to drop our guard.
I’ve been going around showing how the economy has shown signs of being in a “breakout” mode. Ruchir Sharma, in his 2012 best-selling book “Breakout Nations,” was first to use the term to describe the Philippines’ newfound economic dynamism. Indeed, economic statistics in the last four years since 2010 and the six years before it (2004-2009) reveal a clear break in 2010. That was when data showed gross capital formation—the totality of investments, whether domestic or foreign, and public or private—to have swung around from a 9.9-percent drop in 2009 to a 31.6-percent jump in 2010. In the last four years, it has sustained double-digit growth rates, growing annually at an average of 10.6 percent, against a paltry 1.8 percent in the preceding six-year
period. In particular, investments in durable equipment and private construction, respectively, grew at an average of 14.4 and 11.7 percent annually in 2010-2013, a clear break from the -1.8 and 4.3 percent posted in the previous six-year period.
These are unmistakable signs of much-improved business confidence.
Quite significantly, the same breakout is seen in the manufacturing sector’s growth, averaging 8 percent annually in the last four years, a clear break from only 3 percent in the previous period. The government, through the Board of Investments, has caused the formulation of over two dozen manufacturing industry roadmaps so far, in an effort to ensure that this resurgence will be sustained and is not a mere flash in the pan. The aim goes beyond sustaining accelerated growth in manufacturing, but also moves into new and higher value-adding manufacturing activities. And indications so far bear out that this is happening, with the country now being a major world player in shipbuilding, even as we pursue new directions in agricultural processing industries such as coconut water and coco sugar, among others.
Such positive trends, along with peculiar circumstances at the start of this year, have given me confidence that the economy can sustain its growth momentum this year and in the years ahead. I’ve even entered into a friendly bet with fellow columnist (in another paper) and former Cabinet colleague Romy Bernardo, who believes, without wishing so, that we will slow down this year to little over 6 percent growth (lately, he has both upped the bet to double-or-nothing and further lowered his growth forecast).
I have cited at least seven reasons for my own bullishness (“Seven growth drivers in 2014,” NFL 5/20/14). Romy cites specific mounting threats that lead him to question my optimism. One is how commerce is now being widely and severely impeded by port congestion induced by the Manila truck ban—and the government’s move to crack down on “colorum” trucks at this particular time isn’t helping any. Another is the two-prong threat to agricultural performance from an anticipated severe El Niño episode and the massively destructive coconut scale insect infestation. In the end, the winning bet will hinge critically on how well and how promptly the government is able to respond to these mounting threats. In effect, I am betting on the government being able to rise to the occasion.
As I’ve written earlier, the truck-ban issue is a complex one, and apart from addressing the immediate problems it has caused, we need to address it from a long-term perspective. The desired outcome is to achieve much greater utilization of the international ports in Batangas and Subic. Our government borrowed billions of pesos from Japan more than a decade ago to upgrade these ports, precisely to decongest Manila. We have also built new expressways leading to them. Yet they have remained virtual white elephants to this day; even firms literally at the doorstep of these ports still prefer to ship inputs and products into and out of Manila.
As of last week, the Manila North Harbor was reporting more than 102-percent occupancy of its container yard, with seven ships yet to be unloaded. And yet Batangas port has a huge container yard that management recently decided to lease out to an engineering company for lack of better use. It’s a chicken-and-egg problem where low cargo traffic leads to much higher shipping rates. This pushes traders to opt for Manila, where large volumes permit shipping lines to charge up to $200 less per container vs. Batangas and Subic.
Only coordinated actions can resolve the conundrum. What we’ve long needed is a
“summit” meeting of leaders of the various concerned sectors—shipping companies, freight forwarders, brokers, truckers, port authorities, business groups, port and shipping industry workers, academe, civil society, and the national and local governments. They simply need to talk to one another to find consensus on both immediate and long-term actions needed from each of them for a collectively satisfactory outcome, and seal a compact to commit to the agreed actions. This “summit” approach has worked well in the past, and it’s high time we took that approach now.
The same goes for the other mounting threats. There are divergent views on how to solve the coconut problem, and the only way out is to bring various heads together for agreed solutions. To be sure, solutions to these mounting threats to the economy do not lie with the government alone. But it’s high time the government asserted its leadership by proactively bringing together all those in whom the solutions ultimately lie. That way, I can yet win my bet.
* * *
E-mail: [email protected]
