Monday, 13 April 2009

A new economic model for the Philippines–2

The Entrepreneur
Manny Villar
Business Mirror

I WROTE in my last column about the failure of the Western economic model in the light of the current global economic crisis. The best proof is the widening recession that started in the United States. No more straightjacket formulas. It is very clear that what is good for America or China is not necessarily good for us.

Even the extent of the impact of the global economic slowdown has been different for us compared with other countries. Export-led economies like Thailand were battered, while we were not hit as hard; not because we did not strive to be a big exporter like Thailand, but because we were too slow to grow our exports. So, in a way, our slowness benefited us.

What then should be the components of the new economic model for the Philippines? Our key word should be “self-reliant.” It’s the best protection against external threats like the slump in the export markets and the slowdown in other countries’ economies.

Let’s look at our existing resources—natural, financial, human—and find out how we can harness these resources. That will be part of the right model for us.

We have a population of 90 million, making us the 12th-largest in the world. A big population need not be a hindrance to growth. The other way of looking at our population is that it is also a big domestic market, which can drive consumption and the economy, particularly at the present time, when the global markets are shrinking.

Our large pool of English-proficient labor shows us the role of human resource in economic development. It brought the business- process outsourcing industry to our shores, which continues to grow in spite of (or maybe because of) the global recession.

New call centers are opening up as companies in the recession-hit countries look at outsourcing parts of their operations to cut costs. Filipino workers continue to find jobs in countries that have not been affected by the global slowdown, or are trying to stimulate their economies amid the slowdown.

It is heartening to hear about reports that 4,000 Filipino workers leave for work abroad, which means 4,000 families that will receive support for their daily needs. Thus, sustaining and improving the competitiveness of our human resource should be part of the new economic model.

This model should also include among its components entrepreneurship development. After all, overseas jobs are supposed to be temporary. Overseas Filipino workers will go home someday, and they will need livelihood when that day comes. In addition, ask any taipan, entrepreneurship is the way to prosperity.

I have constantly pushed for the development of entrepreneurship because I am a product of entrepreneurship. If we can develop just 1 percent of our population as entrepreneurs, that’s already 900,000 business people who will revitalize our economy, generate much-needed jobs and lift many families from poverty. Otherwise, we will just have a huge pool of wasted talent. And we will lose a big opportunity to boost the economy and help our people.

The timing is right for us to work on a new economic model, taking into account our resources, and considering our own needs.

First of all, we review everything—our resources, the benefits and costs of the economic model that we have been following. Then we identify the components of a new model. I cited some examples with respect to harnessing our human resource. Other people—economists, businessmen, policymakers—should be able to contribute their share, so that we can come up with a whole new model.

I need not overemphasize a crying need for a new economic model. I know it’s a hard task. It’s never easy to discard long-held beliefs and practices, but we need to do it now. It’s just a matter of time before the crisis ends.

We need not wait until the crisis ends. Rather, we should do the work while the crisis is going on, and begin following it as soon as the crisis is over.

So far, we have been lucky. Except for the export sector, we have not seen the full impact of the global crisis. Banks continue to lend, although at a slow pace; companies continue to make profits, although lower than what they made last year; and malls, offices and homes are still being built. Our overseas Filipino workers continue to send precious foreign exchange home.

Overall, the economy is still projected to grow, although at a slower rate compared with the past two years; no one, however, is expecting a recession in the Philippines.

Timing and opportunity are on our side. Let’s not waste them. Let’s begin working on our very own new economic model, now!

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  1. Wow! Yan ang presidente. I have faith in you. :-)

  2. may recession ba? hindi ramdam dito sa Pinas gano. mga walang work, nagnenegosyo. mga walang negosyo, sumasali nalang sa mga contests like wowowee and haha!

  3. I agree with Senator Villar's views and his premises, e.g., relying solely on exports is not necessarily the only way, among others.

    So much criticism had been said about our population growth but it seems that it is even indirectly a big factor in our current economic survival. Without the OFW remittances, and with the fact that the reported Philippine economy is only 50% of the real economy (50% is underground economy), the Philippines could have been in worse situation.

    There was a time we were still timid about promoting OFWs to work abroad and I commented on this to then Sec. Patricia Sto. Tomas. My premise was that overseas chinese, from magtatahos in Binondo then, now controls 85% of our economy and most of the economies of other countries around the world. That is because they went into entrepreneurship and they were not ashamed of starting as magtatahos or fish vendors. Sure, they had to contend with family social problems back home, too. Sure, they will have startup financing problems. The Senator had to pawn his wedding ring for P13,000, no? Vic Limlingan in AIM wrote a treatise about the Overseas Chinese and how they are now a major economic force in their countries of domicile. They are certainly a good model for our OFWs.

    CRC/ UA&P's Dr. Bernard Villegas had been saying also that the Philippines has a demographic gift, i.e., younger labor force are aptly replacing the greying labor force. Hence, we will not (yet) have impending pressures on our Social Security System unlike the full drawn problems of the G20 nations already, who had "effectively" controlled population growth. This favors our medical tourism and retirement industry even and we just might overtake Thailand now, for their mindless copying of the Philippine's mob rule.

    Philippine exports cannot even be classified class "A". If one examines the input-output table of our exports, most of them are just small parts for a product and our exports are therefore highly susceptible to client countries' circumstances. In short, we have no complete Sony TV, Apple Computer (nor a Steve Jobs scheming things in his garage - and even if there is, he would be slaughtered by local vulture capitalists who wants 70% of his venture right off), not even a car that runs on air or water, to speak of.

    We have $600-800B of unmined mineral resources but we export these as raw materials (???) and not complete products. Why? With complete products, these could become $6-8Trillion, no? Worse, we cannot even touch them yet because we rely on foreign investors that do not care about environmental issues and downstream benefits to the host community.

    We do not have a thriving inventors community, our universities do not have R&D wired to commercialization (ala Lawrence Livermore Labs). Our university professors and scholars are busy thinking how potassium chlorophinate can bind with magnesium chlorate for asexual reproduction of ants!???

    We do not have strongly organized angel investors and venture capital in the Philippines which are requisites to entrepreneurship startups. Our alternative only are pawnshop bankers or local vulture capitalists. Right now, Filipino startups in the know rely on the U.S.'s Reg D to raise equity. For entrepreneurs and startups to thrive, we should have those equivalents. For startups to thrive, they must own their venture and capitalists should know better than kill that entrepreneurship spirit (VCs know this well!). Somehow, we either have greedy or oxy-moron local investors. 50/50 is even rejected right away by VCs as weak business models (it is also prone to future stalemates). I can name private partnerships killed by such 50/50arrangements. It simply doesn't work.

    It is good we now have REIT's but facilitated access to these are for big documentary diligent developers with trackrecords the likes of the abled Senator only. Come to think of it, should Vista Land, for example, evolve by becoming an umbrella of smaller abled developers also in the future? That would be walking the talk. And who would not want to work with MBV? I would participate if he thinks about and launches this trickling down the REIT to small participants like me. There should be more long term benefits to it than just the automatic fallacy of diminishing Vista Land's return angle. One qualifies possible downstream participants through their business models and concepts which would otherwise not have been thought of by Vista Land yet. And so, this is also a future business proposal.

    Then, we also MUST contend with corruption. With a P2Trillion annual budget and an alleged 30-40% corruption, we are losing P600-800 Billions (B not M!) a year to corruption not counting those schemes concocted by a corrupt judiciary, among many others. P600-800 billion a year is more than enough to crisscross Metro Manila with subways or MRTs thus dramatically lessening pollution in the Metropolis. Perhaps this is the biggest problem? Perhaps Lucio Tan is right that the Philippines will not prosper in another 100 years - because of corruption. Does MBV still have credence to enculcate to the entire Philippines his 5 core values? He should!

    Of course there are other things to do than just the economy. Will putting a jury system diminish the elks of corrupt judges? Are we too democratic with our media that no sane person should want to be president already? Perhaps Senator Villar is insane for even wanting to. Our media is feeding class CDE because those are the audience of newspapers and free TV. The AB classes are so small it will not finance the media's continued existence. No wonder, the presidency has become a zoogshwang, damn if you do and damn if you don't. Media will never champion elite or government causes. Their newspapers and free TV are consumed by CDEs who gravitates to the "the buzz" or handouts from "wowowee" with the requisite I love Yous melodrama.

    Should we develop online learning instead of answering classroom shortages and teachers every year? In fact, why do parents have to buy new textbooks every year? How many trees are we felling to print those books unnecessarily? It used to be that pweding ipamana ang mga libro sa mga susunod na anak? Why not put books online so we diminish cutting of trees? Even quizzes can be made online already! My school does. Why not broadcast nationwide lectures from class A professors instead? Why not convert those budget for classrooms every year, tweak it a little bit, and include YMCA type sports facilities to diminish drug addiction? And what do we do with the youth who can now work while studying? There was this nostalgic time we praise shoe shine and newspaper delivery boys. We should be able to think of something.

    A transformative economic model done by businessmen in conjunction with academic economists might be what is needed. Certainly these transformative economic models cannot come from university professors who rely on "psychic incomes" and who have never launched their own successful business yet, and who will never succeed in business.

    Lastly, we must look into changing the economic provisions in our constitution, Article 12, to open the flood gates of Foreign Direct Investments (when the world economy turns as it will OR benefit from foreign capital now desperately looking for landings) - and stop quiverring whether the current Malacanan resident is thinking of perpetrating herself in power. What are we afraid of? Haven't we kicked out 2 presidents already through bloodless revolt? In fact, if I remember, the Senator is kindly favored by history for being part of one. We have not forgotten.

    But I still remind the senator to see a psychologist to see whether he is not yet insane to be thinking of running for president.