The investment climate of the country was brightened by the sterling reputation of President Aquino and the expectation that it will be transmitted to fast-track the economic recovery.

The economists agree that the macroeconomic fundamentals are now sound with the fiscal, financial, monetary and, to a certain extent, investments tracks on an upswing. Rising income flows from OFWs has made consumption rather than investment the driver of economic growth.  However, unless domestic production is improved, imports of goods might be increasing, which does not address his key objective of bridging the “employment/livelihood gap” towards poverty alleviation – the root cause of our problems.

    The following notes are some reform issues that need to be addressed to ensure the above key objectives are achieved during his presidency.

    I. Building Strong Clusters of "Sunrise Sectors". The next five years present an excellent opportunity to fast track economic growth by ensuring competitiveness in those services, products and agribusiness which are required by the world.  These could be supplied by large or small enterprises since our source of strength comes from both.  They include those who prepare embroidered components for baby dresses which are then assembled for Macy’s – those who prepare precision metal components for Dornier and Bell planes and precision plastic parts for computers, those who make the ABS brake system for the Jaguars,etc.

    In line with the “Pareto Rule”, we should devote our scarce capabilities and attention to these sectors who will give the most benefits to the Filipinos.  

    Following the lead of DTI, Arangkada Philippines,the Joint Foreign Chambers, PCCI and other stakeholders of the National Competitiveness Council, prepared a list of the “sunrise sectors”. The country is endowed with competitive resources (human and natural) for these sectors which must be synergized by efficient linkages to processing centers and to the markets here and abroad.

    These Sunrise Sectors that can generate 3 million new jobs and $10M new exports annually: Tourism, Agribusiness, Health/Wellness/Retirement, IT Services, Value-Chain Materials, Manufacturing.

                
       II. Logistics- and IT-enabling. In all cases, the need for appropriate infrastructures to achieve logistics-enabled and IT -enabled processes is essential.  This will enable effective movement of natural/agri materials from source to processing to market gateways.  This will encourage easy people movement from urban to rural areas, and vice versa, resulting to truly “inclusive growth”.

    The following are illustrations of how important certain countries place on infrastructure for logistics/IT-capabilities:

    1.  China -  For the regions outside their eastern seaboard, their policy is to establish a matrix of road network 200 kms apart. east-to-west, and north-to-south.  This will ensure that no one, farmer or manufacturer, will be more than 200 kms away from the main stream of economic activities.

    2.  India is supposedly moving as much as 30% of its BPO activities to the rural areas to take advantage of skills availability/costs and to expand growth benefits to regions.  This will mean the installation of appropriate infrastructures to achieve their objectives.

    3. Korea has a Multi Industry Cluster Program wherein products/services  in a region are identified for supply to the world by tailormade links between assets and skills in that place. They facilitate logistics-based and knowledge-based supports to ensure commercial viability.

    4. In the United States and Canada, sustainable progress was achieved in the midlands only with the opening of the Great Lakes to world sea traffic.  The use of multimodal logistics and canal waterways strengthened the competitiveness of the crops and other products from the midlands.

    In today's world, the enterprises need these two enabling processes if they are to be taken seriously as world-class. Hence, appropriate infrastructures to deliver these capabilities have to be in place to attract investors, local and foreign. It is evident that the need for government to install  better infrastructures does not refer to building the “tallest structures”, the fastest trains or grand artificial landmarks like Crystal Palace in the UK (which was a flop), creating "palmtree" islands, etc.

    III. Rank-Ordering for Early Wins. It has been established with the help of Harvard’s Porter Diamond that there are six factors inhibiting the competitiveness of our firms and which limit jobs/livelihood generation shown below in order of importance: Energy Cost/Availability*, Professionalism government interphase*,  Appropriate infrastructures*, Ease of BPLS, Financing for SMEs, Human Resource Skills.

    From the interviews of investors who gave up on the Philippines as given in ADB and JETRO reports, the main reasons for discontinuing operations are embodied in the first three factors (shown with *). If only these top three serious obstacles can be addressed initially, the generation of  3M jobs/year is assured.

 
    We have since learned that Governance is the flipside of the Competitiveness coin.  There are some Policy Improvement Programs in place to address specific flaws as agreed with stakeholders. In addition to tackling the above top three obstacles to get the “early wins”, it is necessary to put in place a fourth *, “Robust Investor Assistance Team” which is currently available only to 25% of our investors.

     IV. Korean Example. People look at Korea and wonder how come they are so much advanced compared to the Philippines?  Korea is one of the countries who followed the Philippines’ EDSA I in reforming their political nd economic system but twenty five years later, Korea is the 12th biggest economy of the world – their people is one of the richest from being one the poorest in the past.

    Korea has scarce resources, arid soil, severe weather conditions, rocky mountainous  terrains  and a war-like situation which demands a lot of their budget and attention.  Their people are probably their biggest asset, with their passion for learning, their determination to get things  done and their deep national pride.

    A student of economic strategy can learn a lot from the Korean experience:  After accomplishing their version of EDSA I, they picked their wisest and best people to occupy the top echelons of government offices, streamlined the structures of bureaucracy,along their fast-growth  strategy.  It included the introduction of a senior minister post to ensure a result-oriented  Public Administration, similar to the Coordination Ministers in Indonesia and Malaysia.

    They brought government closer to the people by technology ('informatization') and strengthened talents by “balik-scientists” with competitive remunerations. Because policies were in place to achieve positive business and investment climate, there were plenty of opportunities for all (professionals and skilled workers) togrow and contribute to national progress. They did not have to look for work abroad. Local governments play key roles in their “national orchestra”, they said.

    V. Build on our Strengths". The Philippines has many strengths to be proud of.  With the emergence of a credible and determined leadership, we should be able to fast track our course to economic growth.

    The problem is that our people talk about our WEAKNESSES most of time, almost mantra-like. We should instead be building on our STRENGTHS and determine how these can make our Products, Services, Agribusinesses the preferred choices of the world.

    In line with “building on our strengths” the National Competitiveness Council is helping identify the HR skills and natural/agri resources which are needed by our Sunrise products, serviced and agribusinesses, as mentioned earlier.
    Following the mega-region approach of NEDA to facilitate clustering and execution, the Sunrise teams will scour the breathe and depth of Regions 3 to 4A to pinpoint the sources of these assets and skills to determine how logistics-enabling and knowledge-support can enhance their competitive stance.

    It is recommended that the master plan for an integrated logistics corridor in this mega-region be finalized and executed via PPP.

    Using the experience from the above approach, similar master plans can subsequently be prepared for the four other mega-Regions.  It is expected that the whole country can be provided with appropriate infrastructures (logistics) with coordinated involvement of the concerned  LGUs and Sunrise teams before the end of President Aquino’s term.

    Bridging the unemployment/livelihood gap will be his biggest contribution to nation building.

    Strengthening our competitiveness in products, services, and agribusinesses required by the world via appropriate policies/infrastructure,and with robust investor’s assistance will ensure that the scourge of poverty will finally be beaten.

By Ambassador Cesar B. Bautista