From the Author: Delivering a speech gives us an opportunity to drive home an important point. Sometimes, we have to talk to a different set of participants about a similar idea. It is okay to duplicate certain ideas that would not have been effective anyway if written in another way.
Honorable Florencio M. Bernabe, Jr., Mayor of Parañaque
Mr. Alexander Flores, President of the Paranaque Chamber of Commerce and Industry
Distinguished guests, friends, ladies and gentlemen, a pleasant afternoon to you all;
It is an honor for me to be with you in this very important event. The topic given to me today “Enhancing Philippines’ Competitiveness” is, indeed, very significant given the situation of the global economy today.
It is worthy to note that, the Philippines' global ranking based on the World Competitiveness Yearbook (WCY) , shows that our country has been gradually recovering from being in the bottom third.
In the past three years, our ranking improved from 49th in 2006 to 40th in 2008 based on the WCY Report. We are hoping that all our economic fundamentals are sound enough to further improve our rankings as we face the bumpy road ahead.
We start 2009 faced with a financial crisis unlike any we have seen in the past decade, a crisis that has not diminished over the last few weeks.
In the United States, nearly 2.6 million jobs have now been lost and there are many people who are anxious and uncertain of what the future will hold. People in the US are traveling less, manufacturers are slashing production and there are job cuts across almost every sector of the economy, leading to a severe drop in energy use.
In the Philippines, we know that Filipino overseas workers are coming back in droves to our country because of retrenchments of several firms in Taiwan, United Kingdom, United Arab Emirates, and Korea, to name a few.
However, while it is not too late to change these series of events, we need to take crucial action now to cushion the impact of the financial crisis in our shores.
How many more countries will go into recession still remains to be seen. The contagion is just beginning. It is precisely because of this that nobody has, as yet, been able to determine the exact magnitude and depth of this crisis. Worst, the crisis grows and spreads across the globe- driven not so much by fundamentals but largely by fear and loss of trust in the whole financial system. The meltdown we are now seeing are not slow motion events. They are wild and chaotic with rapidly spreading side effects.
What then is the impact of all these developments on the Philippine economy? Let me enumerate 5 of them:
1. Slowdown in export growth as the economy of trading partners decline. (Our electronics which make up for more than 50% of our country’s total export recorded a decline).
2. Tightness in global credit markets resulting in high interest cost for new debts. (There is a 4% add- on on the LIBOR as country risk premium plus other charges which means new debts could be obtained at a cost between 11-17 % p.a.)
3. Flight of the speculative capital, hot money, or investment portfolio (More than a billion dollars left in the 1st eight months last year).
4. Decline in stock values (40% lost value compared to the pre-meltdown period).
5. Pressure on the peso and financial institutions with global investment exposure (Peso weakened to almost P50/ $ versus P42 a few months ago.)
Luckily, there are some mitigating factors that partially cushion the negative impact. I can cite 5:
1. Lower petroleum price (from a high of $147/ bbl, oil prices dropped to below $40.
2. Lower prices of imported steel and wheat. (Reducing cost of Construction and Food.)
3. Sustained and increased OFW remittance (at $1.5M/ mo. versus $1.2M- last year’s average.
4. High savings rate (at 26% of GDP)
5. Relatively strong banking system after the 1997 Asian currency crisis.
Given all these, we still need to face with confidence and courage the challenges of further mitigating the negative impact on the poor and vulnerable, sustaining job creation, and directing accumulated liquidity in the financial system to productive investments.
Undoubtedly, for the Philippines, the high growth we have experienced in the past is over and will not be back for some time as the world continues to struggle with the current financial turmoil.
What would it take to enhance our country’s competitiveness?
With the expected sharp decline in consumer spending, government, in partnership with the private sector, must immediately pump prime the economy even with the threat of breaching the targeted budget deficit.
On this score, you will be pleased to know that in our PBC in October last year, PCCI proposed and government accepted to create a P100 billion stimulus package for infrastructure spending. The fund will be contributed 50/ 50 by GFIs and the private sector and the upside is, spending from this fund will not impact on the budget deficit. The mechanics and other details with respect to use, accountability and transparency, structure, sovereign guarantees, monitoring and control are still being worked out by PCCI with DOF, DBP, SSS, Landbank, GSIS, NEDA, and NDC in several meetings since early November. We hope to give you an update on this early this year.
In addition, PCCI advocated and urges government economic planners to put our house in order and make our economy more resilient and globally competitive so that as the world turns for the better, we are ready to seize the opportunities.
In this regard, PCCI has identified and will focus in the next 2 years on 4 key basic areas: namely: Food, Infrastructure, Re-engineered Education, and Energy (or F.I.R.E.) Our advocacies in Tourism, Trade, Legislative Agenda, and other sectors will remain actively in place.
Why these 4 sectors?
First, Agriculture employs a third of our country’s workforce. Paradoxically, we teach other Asian neighbors scientific technology on rice production at IRRI, Los Baños. And yet we are the biggest rice importer in the world. We import 10% of our rice needs because we are losing 28% of our palay harvest due to poor and inefficient post- harvest facilities. Investing in such facilities to reduce losses will improve our chances of being a rice exporter once again.
Second, we need to accelerate the completion of priority infrastructure projects. Infrastructure is a key factor that directly affects the country’s global competitiveness. An efficient transport network will reshape the country’s physical and economic configuration.
From fragmented island economies separated by mountains and seas, the country can develop a unified and integrated economy where people and goods can move and trade swiftly and efficiently.
Third, we need to re-engineer education policies that help develop a globally competitive workforce. According to CHED, only 40% of the yearly 400,000 college graduates are able to land jobs within a year after graduation. The rest becomes part of the rising statistics of unemployment rate. This is caused by many factors, one of which is the mismatch between skills of our graduates and the requirement of the industry. PCCI has joined the Presidential Task Force on Education together with the Department of Education, TESDA, CHED and other stakeholders in the academe, and 8 selected industry champions (shipping, shipbuilding, wellness, steel, mining, tourism… to name some) who will participate in our skills upgrading program to address the mismatch.
Fourth, on Energy, PCCI advocates a predictable energy policy to level the playing field. We are drawing a roadmap to influence policy makers to achieve supply/ demand balance using the right and appropriate mix for our country’s power generation sector. This is aimed at promoting energy self- sufficiency at competitive cost.
In addition to these, the PCCI has created an internal Economic Monitoring Team to keep an eye on the developments in our economic fundamentals. We invite all business leaders to take part in this endeavor to further strengthen the voice of the business sector in policy-making.
As you can see, we are not helpless. More than any program or policy, it is this spirit that will enable us to confront these challenges with the same spirit that has led previous generations to face down war, poverty, and fear itself.
And if we are able to summon that spirit again; if are able to look out for one another and listen to one another, and do our part for our nation and for posterity -- then I have no doubt that, years from now, we will look back on 2009 as one of those years that marked another new and hopeful year for the Philippines.
Let us work together and chart our course for a more competitive Philippines in the years to come. Thank you and mabuhay po tayong lahat.