"Agriculture, foreign direct investment, export trade and tourism"
"Agriculture, foreign direct investment, export trade and tourism"
Despite the fact that the economy of the country has been unable, in recent years, to break out of the 6-percent-per-annum GDP (gross domestic product) growth area, its managers continue to cling to a 7-to-8-percent growth target laid down in the Philippine Development Plan, 2017-2022.
Is the Philippine economy capable of growing annually at a 7-to-8-percent rate? Yes, it can, if four factors that have long bedeviled this country's economic development are finally addressed adequately. The four factors are agriculture, FDI (foreign direct investment), export trade and tourism. Stated otherwise, the Philippine economy will not be able to break out of the 6-percent-per-annum growth area and into 7-to-8-percent terrain if said factors remain unaddressed.
First, agriculture. During the last few decades, the economic managers and development analysts appear to have been razzle-dazzled by the sustained strong inflow of overseas Filipino workers' remittances, by the construction boom that these have ignited and by the rapid growth of the BPO (business process outsourcing) industry. These changes in the economic landscape appear to have lulled them into thinking that the weakness of Philippine agriculture is an issue that can be swept under the rug and that this country can leapfrog its way to developed-economy status without agricultural development.
They are wrong, of course, There can be no bypassing agriculture. The Philippines is now and always will be an agriculture-based country, as indicated by its physical configuration, large (albeit diminishing) share of agriculture in the national economic pie, the number of Filipinos who are farmers and the fact that farmers are among the poorest people in this country. It is said that a chain is only as strong as its weakest link; agriculture decidedly is the weakest link in the Philippine economic chain.
Whenever I think of the Philippine BOP (balance of payments), I am reminded of the taunt of then-challenger Bill Clinton hurled at United States President George Bush in the heat of the 1992 presidential campaign. “It's the economy, stupid,” Clinton said to Bush during one of their televised debates. It is apparent from their analysis of the Philippine economy's condition that this country's economic managers do not consider the chronic Philippine merchandise trade imbalance a serious problem. In 2018, the trade deficit approximated $40 billion. That amount is a little more than 50 percent of total OFW remittances during the same 12-month period. So I say to the economic managers, “It's the trade deficit, stupid.” A trade deficit impacts negatively on the BOP, which impacts negatively on the peso's exchange rate, which in turn causes the inflation rate to rise because of now-high import prices. The Philippine economy's growth will be held down if its managers continue to regard ti trade deficit problem as being of less than crucial importance.
“It's the trade deficit, stupid” can be altered to read “It's the FDI, stupid.” This country's GDP growth has for a long time been driven by consumer spending; it should be able to rely to a great extent in investment spending. Unfortunately, the investment-consumption ratio cannot be redressed in favor of investment spending because this country has long been unable to attract much FDI. The Philippines has perennially been close to the bottom of the list of East Asian recipients of FDI. This track record cannot be entirely attributed to the restrictive provisions of the Philippine Constitution; after all, the laws of other countries in this region embody restrictive provisions also. There are other negative factors at work, and until those factors are identified and addressed, the insufficient-FDI situation will continue to operate as a drag on this country's economic growth.
Lastly, tourism. A vigorous tourism industry has pushed many a developing country out of poverty and up into the ranks of the world's middle-income countries. Quite a few of them have far less to offer tourists than the Philippines has, yet their foreign exchange receipts from tourism are considerably greater than this country's, and the gaps are widening because the rate of growth of tourist arrivals in this country is lower than the counterpart rates of other East Asian countries. In 2018, Thailand received around three times as many tourists as the Philippines; Vietnam, a relative newcomer to the tourism scene, received close to twice as many. Even hitherto-unknown Cambodia and Laos are becoming foreign-tourist favorites. Clearly, the new Secretary of Tourism has her work cut out for her.
The Philippine economy has amply shown that it is capable of 6-percent annual growth. The factors that have been discussed here—a weak agricultural sector, recurrent trade deficits, inadequate FDI inflows and a weak tourism industry—are preventing it from achieving faster GDP growth. Until these negative factors are effectively addressed, the Philippine Development Plan's 7-to-8-percent GDP growth targets will remain just that—targets.