Economic problems Essay
Five economic problems and five social problems of the philippines? social:
1. lack of individualism. don’t need to abandon social structures totally. 2. colonial mentality. royalty, status symbols, subservience 3. western influence. don’ love their own
4. parinig system
5. authoritarian economic:
1. leaders are mostly landowners who don’t know how to make a profit 2. consumers are lured by too many commercial establishments like KFC, McDo, Jollibee, Levis, etc. even those who cannot really afford are lured to buy instead of save. 3. lack of effective social services programs
4. pork barrell does not benefit people but the politicians only 5. too much imported goods
Solution to Economic Problems of Philippines
By John Mangun:
To even the most astute observer whose sympathies might lie with the current administration, it would seem from the results of the last national election that the government of the Philippines was populated with thieves, intellectual dwarfs, and other assorted clowns with high name recognition. However, an occasional jewel of competency and perception can be found in government even if the press and media is so unaware of the fact.
There are basically three attitudes displayed when it comes to talking about improving the Philippine economy. The government, as embodied in the inauguration speech of President Arroyo, tells us what needs to be done, that the administration will do it, and offers no plan or direct solution in public. The pro-poor believes that the economic pie will never get any bigger and would prefer everyone be equal…and poor while trying to get a few more crumbs for its constituent base. Their agenda is to raise the “poor” to higher standards; an extra can of sardines each day. They intend to achieve this by forcing those who are wealthier to eat sardines also. The “moneyed elite” (probably you and me) has a different personal solution.
They ignore the big picture while concentrating on prospering in and protecting their own small world. Nevertheless, there is a bigger picture that needs to be examined and solutions developed that fit reality, outside of political considerations. Department of Trade and Industry Secretary, former SGV Chair Cesar Purisima, gave one of the most comprehensive, enlightening, and realistic appraisals of the Philippine economic situation I have heard in many years. Of course, you will not have read his observations any place else and I take pleasure in liberally quoting from his remarks as delivered before the Supreme Court as Oral Arguments in connection with the Motion for Reconsideration on the Constitutionality of the Mining Act. Bear in mind though that this man has shown he knows his business in other comments made since his appointment. While the former occupant of the office concentrated on importing “no-value added” call centers, Secretary Purisima said this a few months ago; “If we would be able to help improve (Existing Filipino) SMEs’ productivity level, its impact on our country would be tremendous. The country could generate over 800,000 new jobs if each SME would add one employee”. If we had spent as much time helping Filipino business in the last years as we did “attracting foreigners’, we really might have created jobs.
While we need foreign call centers, we also need to support Filipinos creating jobs for Filipinos. Truthfully though, you need to understand the problem before you can attempt to fix it. Purisima does that and the conclusions based on the President’s speech are disturbing. The President sets as a goal for her administration the creation of “even ten million new jobs” in the next six years. Of course, this is not a perfect world. However, the facts are these: “As of the latest survey by the National Statistics Office, 5 million Filipinos are unemployed (and) an average of 1.8 million Filipinos enter our labor force every year”. According the statements of Sec. Purisima that means the President and her administration needs to create ELEVEN million jobs just to have the same level of unemployment that we have right now. Therefore, what the President should have said is that even if she accomplishes her highest goal, the unemployment picture will actually be worse when she leaves office. Her best will just not be good enough. If she achieves her more conservative goal of creating six million jobs in six years, unemployment will be twice as bad as it is today. Isn’t that encouraging. I guess the election really did come down to a choice between two ‘evils’: twice as bad or ten times as bad an economy.
What the President failed to elaborate on in her speech, and particularly since then, is what resources and effort that it will take to generate that kind of employment for the nation. Here the facts create even more apprehension as to the future. Secretary Purisima: “To create one high-value job, the Philippines needs to attract one million pesos in investments. To create one job which pays the minimum wage in a micro or small sized enterprise, that enterprise needs to allocate around Php 50,000 pesos in capital investments”. Are you hearing this? If we are to create ten million MINIMUM WAGE jobs, we need to invest 500,000,000,000 (five hundred billion) pesos. That is roughly ten billion dollars are current exchange rates. Another way of looking at that amount is noting that it is about the same as President Arroyo overspent in the last three years supporting the largest budget deficit in history. While she says she will balance the budget soon, we still need to pay back the 500 billion deficit and spend another 500 billion for all this job creation. There are solutions though and Secretary Purisima has some excellent thoughts on that next time. Looking for a $10 Billion Industry
The Philippine government’s (Not the Arroyo administration) own estimates is that it would take five hundred BILLION pesos of investment capital to generate ten million minimum wage jobs. I can find no sensible person who believes that the President will be able to come near her vow of six million new jobs, let alone ten million in six years. And remember that even if she is able to create six million, with 1.8 million new job seekers every year, we will be at exactly the same point in employment/unemployment in 2010 as we are now. Further, we certainly cannot cope with those ten million low wage jobs being created in the NCR area. The problem of job creation is not simply the huge amount of capital expenditure needed for business to expand to meet that need. Another significant concern is the type of business in which the investment is made, but also the geographical location of the business. In remarks before the supreme Court by DTI Secretary Purisima that I quoted last time, the Secretary made a valid point that the Philippine government has been stuck between a rock and a hard place between trying to attract capital investment to the non-urban areas while investors still flock to those urban areas.
Naturally, if jobs and opportunities were available outside of the metropolis, our over crowding, squatter, and resource problems would diminish. “Despite the efforts of the national government for the past 50 years to disperse economic opportunities to the countryside industrial and economic growth has remained concentrated in urban areas. Domestic and foreign investors are drawn to the cities because of the comparatively high growth potential in urban areas.” Investors need the infrastructure of the city; the government needs to keep people out of the city. Is this a conundrum that cannot be solved? Again, the Secretary: “The Philippines is operating in a world that is marked by the integration of companies, industries and even economies. Such integration forces companies, industries, and economies to specialize and to consolidate their operations and activities on the most efficient, most competitive sectors.” Which is exactly what I have been preaching for years: the Philippines must first concentrate on those economic areas through which we have a chance to succeed quickly: agricultural, mining, tourism. “Various offices of the executive branch found that we can quickly channel the private sector’s energy into industries where we have proven to be highly competitive, where our natural endowments clearly give us an edge.
One such industry is mining. Mining is one industry in which we clearly have a competitive advantage. The Philippines has the fifth (5th) most mineralized territory on earth.” Are you listening? The Philippines is the fifth largest holder of mineral wealth in the world! Talk about God’s blessing. In addition, the mineral industry is perfectly designed for emerging economies. “One great advantage of the mining sector over other industries is that this sector has an almost 100% value-added which means that almost all of the elements of production are sourced locally. In the electronics sector, value-added is only 30% while for garments, it is at most 50%.” And how much value added is generated by call centers? So why aren’t we rich? ” In the 1970s, minerals accounted for more than 20% of our export earnings. At its peak, in 1974, mineral exports had a 24% share. The 1980s and the early 90s were critical years for the mining sector as domestic and international factors depressed the industry. In 1995, we exported close to nine hundred million dollars worth of minerals (US$900M). Also at that time, the mining industry employed more than one hundred thousand (100,000) people.”
The Ramos administration recognized that a significant part of our future economic potential lie in the mineral sector, hence the Mining Act of 1995. The Mining Act was one of the major accomplishments of our Congress, so beneficial and intelligent was the law that other nations copied our law on which to pattern their own mineral industry. But the Supreme Court invalidating that law is not the issue for this discussion. The issue here is why we desperately need a viable minerals industry. The Arroyo administration has for a long time recognized that this sector can help save and enhance the Philippine economy. The President has been a strong support of the industry once she learned the facts and overcame the anti-Philippine nonsense that the anti-mining people spew. And what are the facts. Finding 10 Billion Dollars Investment
By the government’s own admission, it will require some ten billion dollars of direct investment to create the number of jobs necessary to get this economy growing out of poverty. That investment must come into an economic sector or sectors that meet these parameters: labor intensive, require a long-term financial commitment, and can operate within the existing Philippine environment, social and political. The ten billion will not be found in call centers or any of the individual priority sectors that the government is promoting. For your information, these are construction materials, electronics, food, giftware and holiday décor, home furnishings, marine products, motor vehicle parts and components, organic and natural products, or wearables. None of these priority sectors meets the criteria mentioned above and therefore cannot be counted on. We need investment that will last and will create jobs for all the people, not just those who speak good English or live in the urban areas or are dependant on a growing consumer oriented export market. Otherwise, growth is not sustainable and sustainability of investment in the face of whimsical government decisions, fluid international conditions, and other variables is difficult. However, there is one single industry that can provide what we need and this administration recognizes it privately if not publicly.
The minerals industry meets all of our investment needs and President Arroyo and her administration have actually been doing much to attract this type of investment. Unfortunately she has been hampered unmercifully by the loonies of the left and the equally loony pro-poor groups, whose only agenda is creating more poor people in order to keep their foreign NGO funding. In 1995, the Philippines passed a mining regulatory act that was so beneficial to both the nation and to the industry that other countries copied. After the bill became law, all 25 of the world’s largest mining companies began investing in the Philippines. In 1998 when the law was severely challenged by some groups (who are ‘challenged’ in other ways) ‘, 24 of those investors left. Why mining? In 1995, we exported almost a billion dollars of our mineral wealth. The industry employed 100,000 people directly and another 600,000 indirectly. These numbers were expected to double yearly for the following five years. It did not and now we suffer. The minerals industry is both capital and labor intensive. In order to develop mineral wealth, a mining operation will require approximately $500 million dollars or 25 billion pesos of investment. Now let’s see. 25 mining companies investing $500 million each. . . 12.5 billion dollars, which is what we need to create ten million jobs. I wonder how many jobs the anti-Filipino groups who stopped this amount of investment created in the last seven years? Not all jobs are created equal and the Philippines needs the full gamut of occupational opportunities.
The mining industry employs the most highly skilled and highly educated to the most common laborer. and in the scope of the business, both jobs are equally important as the industry cannot function without them. Further, these lower skilled jobs are created in exactly the places that the country needs them; in the rural areas. Not too many mines are slated for development inside Metro Manila leaving plenty of room for those high-tech call centers. Mining investment is sustainable unlike all the others because it takes five, eight, twelve years to bring a mine into operation, meaning the investor commit the time, and the treasure before the investment starts. Mining costs a fortune and takes a long time to be successful, all the while requiring huge sums of money. We just had that experience with the Malampaya project in oil and now with the Rapu-Rapu poly-mineral project in Leyte. There is no question that economically the minerals industry could make the difference for the Philippine’s future. Two major issues have held mining back; foreign ownership and environmental concerns, both valid apprehensions, ownership being debated in the Supreme Court now. The Philippines does not have domestic capital to develop her mineral wealth. The choices are two; let the people starve while riches lie under their feet or find a solution. This cannot be an either/or proposition; either Filipino ownership or no development. That would be plain stupid. Other countries have been able to keep development from causing environmental problems.
Why can’t the Philippine do it? All it takes is enforcing the laws and punishing the lawbreakers. Is that too much to ask not only from the government but also from the people? Or is being poor, hungry, sick, uneducated, and future-less a better option simply because it is an easier option? We are always looking for quick economic fixes. I remember when prawn farms and aquaculture were going to be the saviors of the economy. Then came rubber shoe factories, electronics, call centers, and on and on. These are all sari-sari stores in comparison to mining. Other countries know it. Peru exports $3.2 billion minerals yearly. Mining accounts for five percent of all employment in Kazakhstan. Minerals contribute almost 20% of Papua New Guinea’s GDP. Like it or not, time is running out for the Philippines to think sensibly and realistically about this issue. John Mangun is a business and political columnist writng from the Philippines over the last eight years. He is also an investment banker and stock broker. In the past, Mr. Mangun hosted a TV show, and was interviewed by Time Magazine, Asia Week and other publications. His blog can be found at mangun.blogspot.com