Great Speeches: 2005 -General Economic Outlook of the Country and Abroad

Fellow chamber members, good afternoon.

At the outset, allow me to get straight to the core of my presentation – the general economic outlook of the country and abroad.

There is no truth to Persistent rumors that the Philippine economy is at the brink of collapse. The rumors are grossly exaggerated.

The numbers as of the first half of the year say that it continues to grow. The government’s growth forecast for the whole of this year has been adjusted to a range between four and five percent. It is a notch slower than the January forecast ranging from five to six point something percent.

Assuming a low-end growth of just four percent is reached, that will be very far from the brink. A collapse means a recession or shrinking of the economy. We are speaking of a moderate growth of at least four percent despite all the noise in the political arena.

Having said this, allow me to get into the details of my presentation. First is the impact of investments and exports. Let’s start with investments. The Board of Investment (BOI) the other week released through the newspapers the mid-year report on investments and concluded it was a big improvement from last year.

Investments

As expected, foreign direct investments dripped in, in trickles. They have been out of the picture for some time now. The growth was pumped in by local entrepreneurs. BOI’s facts confirm my observation in my visits to chambers from Tuguegarao to Tawi-Tawi that our local businessmen don’t get scared easily by political infighting.

The good news is, local businessmen continue to bet on the future of the economy. They have not chickened out. The lesson must have already sunk in. We, the Filipino businessmen, if we put our collective minds into it, will bring progress and prosperity to our country.

Japanese, American, Chinese and European money may help later. But when the chips are down, we are on our own. When things look rosy again, that’s when foreigners put in their stakes.

Exports

Philippine export in the past decade was the economy’s saving grace. Double-digit growth from 1992 to the year 2000 pushed the export sector from contributing one fifth of the Gross Domestic Product in 1991 to one half of GDP at the turn of the century. In dollar terms, export revenues grew from $9 billion to $38 billion or more than four-fold in 10 years.

A global trade slump in 2001 resulted in export decline of over 15% that year. We fully recovered and posted real growth of $1.5 billion from 2001 figures on sales of $39.5 billion last year.

For the first five months of this year, most of our exports still posted moderate growth but the erratic performance of electronics and semiconductor products due to softer demand in the global market, moderated over-all growth. We have not pared down our target of hitting a 10 percent growth by December.

All things considered, however, especially the continued rise of oil prices in the world market to historic levels, we may miss our target by a few percent.

We are still to push exports to double-digit growth sustained in the 1990s. Its performance had given us a glimpse on what can be achieved if we can coax the entire economy into performing like the rest of East Asia.

Political Economy

Now, let me touch on our weakest link, the relationship between the government and the private sector as both affect economic growth. In our country, it is extremely hard to draw a straight line between the political rulers and the economic elite. At least in Metro Manila and maybe Cebu, the borderlines are clear. But in most provinces, the political rulers and economic elite are one and the same.

The concentration of wealth and political power in the hands of a few hundred families may have been the biggest obstacle to the redistribution of opportunities to improve life in the Philippine countryside.

The situation is not, however, hopeless. The families of Overseas Filipino Workers, better known as OFWs, are slowly changing the economic landscape in rural Philippines. Some are turning into a new breed of entrepreneurs. Some are buying lands from the old, unproductive landed gentry. Others are modernizing Philippine agriculture by bringing in tractors, threshers and other motorized farm implements. In some towns, OFWs are getting elected in municipal government.

The Bangko Sentral ng Pilipinas has estimated that OFW remittances may hit $12 billion this year. That is more or less P688 billion directly reaching Filipino families this year. Imagine what that kind of money can do if invested wisely.

Global Competitiveness

If we accept the country’s global competitiveness ratings as gospel truth, it is indeed going downhill. But if you find time looking for centers of excellence, you may note that Jollibee is not alone. A new breed of Filipino entrepreneurs like the Hortaleza couple of Splash or the Zesto Juice drink of Alfredo Yao, are proving to be world-class.

Again, don’t forget the OFWs who are coming home. They have proven themselves equal to any other race in their fields of expertise anywhere in the world. Given an even chance to excel in the domestic front, they will again prove equal to the challenge.

This brings me to my latest advocacy. I firmly believe that local governments and the local chambers are capable of creating a favorable climate for business and investment in their home turfs. They can hammer out investment packages and sell those packages to investors elsewhere in the country and abroad. The strategy will disperse industries, jobs and wealth across the archipelago.

If you may recall, former Cebu Governor Lito Osmena did just that for Cebu, selling the province as a tourist and investment haven in the Pacific when the rest of the economy was sinking during the last years of President Marcos. The farther the region or the province is from Manila, the higher is the opportunity of local governments to create a healthy business environment.

Of course, a determined national government can make a difference. It can build modern ports like what the Vietnamese government is doing now. It can cut down red tape in the processing of business related papers. It can run after smugglers, tax evaders and their patrons in government. It can reduce the cost of doing business. It can change policies in keeping with the changing times. It can reform itself into efficient support service machinery. The opportunities are limitless.

Opportunities Abound

In the agriculture and lifestyle sectors, there are still huge opportunities for creative entrepreneurs. I have said many times, that the Philippines is one big greenhouse. However, why is it, that the Philippines still imports sugar, rice, pork, beef, and today, even vegetables and spices -- our most basic food needs?

If you go around Southeast Asia, you will notice immediately, that our cost of living, is higher than most. Indonesians and Thais can have a full meal for P20.00, while our workers cannot. A self-respecting nation, to keep its economic independence, must produce its own food in sufficient quantity. That is the only way, that we can ensure that other nations will not use food supply, as a blackmail weapon against us in times of crisis. The rich nations like Japan, European Union, and the US, knows this only too well. This is obvious in the WTO negotiation, where food subsidies, have become the most critical issue, and where the developed economies, refused to give up the subsidies that they give to their farming sector, even if the rest of the world demands that the practice be stopped. You will recall, that during the Cancun ministerial meeting 3 years ago, the WTO discussions collapsed, because of this issue. It appears, that in the forthcoming Hongkong Senior Ministerial meeting of the WTO, the same will happen again. For the developed countries, food self-sufficiency, is equal to national security.

In the case of the Philippines, the food sector, has been shrinking in the last two and a half decades. Today, it only contributes 15% of the total value of goods and services, or our GDP. And yet, it is in the food sector where 40 million of our people depend on for livelihood. As a result, half of our 83 million people are poor, for they produce so little, and even earn less.

To my mind, the key, is to make farming profitable to the tillers of our soil. Fishing and fish culture must be made a decent source of income for our fishermen. The exploitation of our forest resources, must bring progress to our forest dwellers.

That is not what is happening today, because in our economy, it is the traders that make the large profits, out of the sweat of our farmers and fisher folks, who remain dirt poor. And, who are the traders that I am referring to? If you go around the country, they are the Chinese-Filipino businessmen. This explains why sometimes, they resent us.

It is therefore our duty, as a business leaders and entrepreneurs, to change this impression, and more importantly, to change this distorted trading system. We need not go directly into farming and agriculture, we must however, try to go into the processing of produce coming from the farmers. Your region, a vast agro-industrial area as strategic as Cebu, offers the solution to some of our agriculture mishaps.

Tourism and Investments

Let me also talk about tourism. It is often said, that the Philippines, can become a world-class tourist destination, with white-sand beaches and lush rainforests, and potential mountain resorts and spas, not to mention our very hospitable natives.

Visayas never runs out of these landscapes that offer every tourist, local and foreign alike, the sanctuary to relax and get out from the bustling world of the metropolis. Cebu, recognized by our government as a major tourism hub offers tremendous opportunities for tourism and economic activities to prosper and these be cascaded down to other areas in the region, Guimaras, Ilolilo, Bacolod, Samar and Antique, to name a few.

In making these ideas become parallel to our vision of creating an attractive tourism destination, the other component where there is a great demand for private sector intervention is in the area of tourism investments. And this we have to champion. Until some of us begin to take a more serious look, and gamble at these exotic places, this would be another opportunity lost to us and our nation.

Sunrise Industries

To end with a ray of hope, let us see if we have been developing sunrise industries. The air is full of where and how we have gone bad, most of us don’t bother to look for our redeeming sides, anymore.

Are there silver linings behind the dark clouds? In Metro Manila and other urban centers, the in-thing today are call centers and other business process outsourcing operations or BPOs. Call centers have filled up most of the vacant floors of buildings in Makati and the Ortigas business centers. These are spilling out to Alabang, Quezon City and Subic.

These services companies are cornering the best new graduates by offering starting salary rates much higher than the established corporations. The latest estimate is that, call centers have put up about 60,000 seats, employing close to 100,000 young men and women as of the end of June this year.

BPOs and other information technology enabled services have been slower at growing but a wide variety of services from legal research to medical transcription to accountancy services are sprouting. Official, however, has been slow.

Outside of these high-technology driven industries, I foresee a steady growth of enterprises and new industries that find themselves integrated in the Asia-wide production, supply and distribution chain. Our trade with the rest of Asia is expected to steadily rise as parts of the regional economy are drawn closer to each other.

This has happened in the electronics and automotive industries. As we rediscover our areas of complementation, other industries will find where and how they can get into one bigger chain. I suspect that integration will make a big difference when Asian governments realize the need to put together a regional food supply chain. Host to almost half of the people on earth, Asia has the demand push and fast acquiring the purchasing power to stage a new green revolution.

Keeping the momentum alive

We, in the chamber movement over the years have become the critical catalyst for economic development. In most instances, we have shown and led the way for economic survival and cooperation. In this time of great ordeal that our nation is beset with, we again stand firm as an institution to serve our small constituents with important and key services needed to survive the test of time.

As we do our part, we also need to make those in government realize that they must also clean their acts. That is why we continue to advocate for red tape and corruption in the processing of business papers be decisively checked.

At the national level, we are concentrating on processes at customs, BIR, the DENR and the housing arms of government. If they can make it easier, faster and cheaper to get import and export papers processed, that would go a long way in helping boost our international and domestic trade.

After my appointment as Special Presidential Envoy for Trade Negotiations, PCCI is now active in putting together the private sectors negotiating positions in on-going Free Trade talks with Japan and China, and preparing for forthcoming talks with the United States.

We need to get our acts together in this. We need your inputs. This is the reason that a week after this convention, we are again holding a consultative forum on trade negotiations, where will asking all of you give substance in defining our national position in all trade agreements we are negotiating.
At your level, I strongly suggest that you help us draw what constitute national interest in the economic arena.

As I also suggested to other field chambers, I also encourage you to continue representations with your local government executives in checking red tape in their respective territories. The City of Mandaue is a classic example of a business friendly LGU. Business friendly local governments, by just reducing red-tape to a minimum in the processing of business permits, building permits, clearances and the like, can be of great help in encouraging economic activities at the barangay level.

These things look small. Taken together, they constitute the over-all business climate at the ground level.

We have empowered the five regional PCCI vice presidents including Metro Manila to draw their own plans, programs and projects including their advocacies, when I took office early this year. We have helped fund some those projects like the Business with The Poor pilot projects funded by Senator Kiko Pangilinan.

We sought for help from international development agencies for other programs that qualify for international anti-poverty support. The rest, they implement with resources they generate themselves.

Complementing all these initiatives, in the next few months we will start engaging ourselves in a real MSME development agenda that will provide the base for MSME loan guarantees and minimize the risk of lending to our sector. Through an MSME development center that PCCI will be pioneering, we will be able to service our member MSMEs, and improve the access of these enterprises to various lending facilities both from government and private lending institutions. And in this area, I will need your chamber’s support so we can champion together real and accessible funds for MSME development.

While those in government are still talking about federalization, we, in PCCI, have done it. We believe that the men in the front are in the best position to know and act on the issues, problems and challenges in their own communities.

In capsule, what I have been putting across is this. At this point in our economic development, it is no longer good business sense to wait for the climate to improve. We must take a direct hand in shaping it.

Some courses of action may look too little or too simple. Others may look great. At times, those in government are a burden. In others, they may be valuable partners. But if we are to build an economically healthy nation, a nation that can give decent jobs to all job seeks, we have to do our part.

Ladies and gentlemen, the political climate may look hazy. But the economic climate in our country is not that bad.

We just keep our cool. Do what we do best which is doing business and making investment decisions. Like all storms, man-made or nature born, this too will blow over.

Thank you and good day.