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

Economists agree that the macroeconomic fundamentals are now sound with the fiscal, financial, monetary and, to a certain extent, investments tracks in 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 increase, which does not address his key objective of bridging the “employment/livelihood gap” toward 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.

Most benefits

In line with the “Pareto Rule,” we should devote our scarce capabilities and attention to these sectors that 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 “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 sectors, which can generate three million new jobs and $10 million in new exports annually, are: tourism, agribusiness, health/wellness/retirement, IT services, value chain materials and manufacturing.

II. Logistics-and IT-enabling. There is an urgent need for appropriate infrastructure to achieve logistics-enabled and IT-enabled processes. This will enable effective movement of natural/agri materials from source to processing to market gateways. This will also lead to easy movement of people from urban to rural areas, and vice versa, resulting in a truly “inclusive growth.”

Infrastructure projects

The following are illustrations of the importance certain countries give to infrastructure for logistics/IT-capabilities:

1. China—For the regions outside the eastern seaboard, the policy is to establish a matrix of road networks 200 km apart.

This will ensure that no one, farmer or manufacturer, will be more than 200 km away from mainstream economic activities.

2. India is supposedly moving as much as 30 percent 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 infrastructure to achieve its objectives.

3. Korea has a Multi-Industry Cluster Program wherein products/services in a region are identified for supply to the world by tailor-made links between assets and skills in that place. It facilitates 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, enterprises need these two enabling processes if they are to be taken seriously as world-class.

Hence, appropriate infrastructure to deliver these capabilities have to be in place to attract investors, local and foreign.

Providing better infrastructure does not mean building the “tallest structures,” the fastest trains or grand artificial landmarks like Crystal Palace in the United Kingdom (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: energy cost/availability, professionalism government interphase, appropriate infrastructure, ease of BPLS, financing for SMEs, human resource skills.

Serious obstacles

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. If only these top three serious obstacles can be addressed initially, the generation of three million jobs a 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 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 percent of our investors.

IV. Korean example. People look at Korea and wonder why it is so advanced compared with the Philippines. Korea is one of the countries that followed the Philippines’ Edsa I in reforming its political and economic systems. But 25 years later, Korea is the 12th biggest economy of the world—its citizens are now among the richest.

To think that Korea has scarce resources, arid soil, severe weather conditions, rocky, mountainous terrain and a political situation that demands a lot of its budget and attention.

Its people are probably its 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 Koreans: 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, and aligned them to a 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 pay. Because policies were in place to achieve positive business and investment climate, there were plenty of opportunities for all (professionals and skilled workers) to grow 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 achieve sustainable economic growth.

The problem is that our people talk about our weaknesses most of the 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 that are needed by our sunrise sectors.

Following the mega-region approach of Neda to facilitate clustering and execution, the sunrise teams will check 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 masterplan for an integrated logistics corridor in this mega-region be finalized and executed via public private partnership.

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 infrastructure (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, agribusinesses required by the world via appropriate policies/infrastructure, and with robust investor’s assistance will ensure that poverty will finally be beaten.

By Cesar B. Bautista
Philippine Daily Inquirer
First Posted 20:47:00 03/13/2011

original source: http://business.inquirer.net/money/topstories/view/20110313-325223/Building-on-our-strengths-for-sustainable-economic-growth