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Friday, November 11, 2005

Understanding the Philippines' Medium Term Development Plan (I)

In October 2004, The Philippines' Medium Term Development Plan was Presented by then Economic Planning Secretary Romulo Neri (and at time of this posting, Budget Secretary). In it highlighted the roadmap by which the Arroyo Administration would do its job. The question, given today's and tomorrow's political climate, is the Medium Term Development Plan doable and even if it is, should it be at all implemented and reflects what needs to be done?

We begin by looking into its Economic and Job Growth plan, specifically trade and investment. Given that the presentation was made in 2004, the situation has somewhat held true. For example, the Philippines did produce over 6% growth and we likewise did more or less 11% unemployment in the same span of time. And it rightly told us that the country experienced the lowest capital outlay in the region. The presentation likwise honestly told us that in the Philippines there is a high cost of doing business.

In today's society--- a year later, the country is still doing more or less 11% unemployment and 20% underemployment. Those numbers come from NEDA themselves.

There is a high cost to doing business in the Philippines. A fact that the Government admits and choses to do something about it. Thats the easy part. The extremely unreasonable high cost of power really is the greatest burden of business today. And the Administration of Gloria Macapagal-Arroyo intends to reduce this red tape, and make it easier to do business in the Philippines.

The Administration's targets then was to raise exports to PHP50 Billion pesos and investment rate to 28% in two years. It also boldly targets to spend PHP100 Billion incremental spending on capital as well as to support 3 million entrepreneurs and triple loans to MSMEs.

The Administration is aiming to modernize infrastructure, reduce cost of power, mobilize and discriminate knowledge, make food plentiful and affordable and reduce red tape. To accomplish this they wanted job creation and investments in software BPO, in call centers, in jewelry, in medical services and healthcare, automotive and electronics sectors. They aimed to generate jobs agribusiness, mining, tourism, hotels and restaurants, entertainment, in small enterprises.

These are all excellent endeavors--- and exactly what one needs to stimulate an economy. The Arroyo Administration aims to provide credit, technology and marketing support to help Small and Medium Enterprises, which makes up 90% of business in the Philippines.

With only the services sector doing well--- but still lower than than the inflation rate, and with high taxes 32% corporate tax, 12% value added tax and then there are so many other fees, taxes and licenses, with high bank and power rates--- this is not an environment that stimulates business.

The plan of the Arroyo government is a first step--- towards the right direction and this intent to do so is praise worthy. It is not enough. The negative factors affecting business will doom the Arroyo Administration to fail.

Let us take a real world example. For an office renting a 45 sq. m. room, running two computers (for twelve hours a day), an air conditioning unit, florescent lights, a water dispenser, a television and a PC running 24/7--- will cost a small business US$100 a month easy. Thats US$1,200 a year, and in a country with a per capital income of US1,000 thats a lot of money. Imagine being an Entrepreneur wanting to setup your own call center with twelve seats running 24/7. Imagine then your electric bill during those crucial months of startup--- it then becomes an added burden for an investor who can probably divert that kind of money to his business and that US$1,200 per month is a heavy burden for a company just starting and getting its bearings.

In simple language, make it worthwhile for small entrepreneurs to build high technology businesses from the Philippines' domestic market. With an abundance in knowledge workers and daring minds, high technology need not require a million dollars in initial investment and a foreign partner and grow a business from there.

Yet this shouldn't deter people from building businesses when an idea strikes them. We can all complain about rules of the game or the environment isn't suited for a particular enterprise. the only thing we can do is live with it and execute. All it takes is determination, skill, talent and luck to pull it off. Technology can be an enabler if only every Filipino can draw up that courage and execute.


jemy said...

I agree that it the statements in the medium term development plan are good, if fulfilled.

But that's the problem with this administration, heavy (not necessarily good) on the soundbites but too inconsistent, fickle, and insecure to be able to carry out its promises.

Who wouln't agree that poverty eradication are great objectives? The problem is in the execution and one wonders if this government has the people, the money, and most importantly the will and leadership to have the same executed.

benign0 said...

This is a concept that many Pinoys cannot understand -- that capital creation and economic power are underpinned by IDEAS. And it is the creation and furthering of ideas that CREATES VALUE in an economy. IT provides a huge opportunity to create value on ideas with minimal financial capital. If only we as a people can grasp this simple concept and EXECUTE!

jemy said...

true, ideas, yes. a philosophy too is needed. it would serve as a compass, when things get too confusing or difficult, a philosophy(whether it be in governance, trade, economics, law, welfare, etc.)would help in cutting through those doubts or difficulties.

the problem is that a lot of the actions being presently taken - specially by government - are not underlined by a sophisticated philosophy (not gathered merely through textbooks or seminars) that would serve to self-regulate such actions, provide consistency, and force the actor to think not only of the short term but of the longer view.

there are many ways in which to do something but we have to learn to act in a manner that identifies us as a people (and not merely copycats of others), matches our history and values (if we don't know what they are then we're really in trouble), and looks forward to the kind of country we want to be.

for far too long we've acted in a manner because an internatinal org came out with this study, because this country did it this way, or the newest batch of foreign educated postgrads suddenly bring home the latest textbooks.

we need to start doing things our way because it is only us who could know ourselves (our strenghts and flaws) best and, thus, should know what would work for us best. what that way is, is something we have to think long and hard on.

benign0 said...

Absolutely agree, blur. For example, Thai, Indian, and Chinese people by simply being Thai, Indian, and Chinese, already command a premium as restaurateurs. In essence, the words "Thai", "Indian", and "Chinese" placed before the word "restaurant" already conveys perceptions of high-quality food.

You are spot on when you say "a lot of the actions being presently taken [...] are not underlined by a sophisticated philosophy". This is the reason why we have such a spanking track record of incoherent planning, disjoint action, and The Beast itself: *ningas-cogon*.

Jeepneys (another example) could have been the cultural icon it was supposed to be if we had developed it into something we could truly be proud of (our entire transport system including our trains and buses could have been motifed as such). Instead, we allowed it to degenerate into the socio-economic problem that it stands for today.

jemy said...

yup! i saw your blog entry regarding jeepneys and completely agree. jeepneys have always been touted as a symbol of filipino ingenuity and innovation. but what kind of symbol is that when the jeepney is inefficient, unsafe, environmentally unsound, and has not even progressed or developed much from its original half-century old design?!

come to think of it, considering that a lot of the elements of our society has not even progressed far from the old third republic make-up, perhaps the jeepney is indeed a good symbol. for what is a symbol but a representation of a reality.

in any event, going back to the mtdp, its pretty much the same thing. no philosophy behind it (poverty eradication probably came from a world bank slogan or was inspired by jeffrey sach writings), no planning worth the name (arroyo wrote the thing up, overriding that neri, without the input from any consultation whatsoever), and definitely - if the history of this administration will be any guide - will be the victim of ningas cogon (if not the lack of strength to face up to the changing political winds).

cocoy said...

benign0 the reason why thai, indian, chinese food because there are shops and businesses all over the world famous for spreading their cuisine. filipinos are all over the world but few are enterprising enough to open a shop or a mom and pop store that has filipino dishes/food/stuff. i'm sure there ought to be one or two good shops say in san francisco or elsewhere that sell it so that other races can sample our dishes.

that said, we go to jeepneys. you guys have a point. the jeepney is suppose to be a symbol that represents manila. i had a manager from hk visiting town and as we were headed towards a customer, he commented on a jeepney. he saw the tires were not in good condition that the vehicle itself doesn't look safe.

now the problem with jeepneys and filipinos in general is that we don't have an enterprising spirit or rather, we have no good sense of marketing. i'm talking in general terms here because there are lots of good filipino minds in advertising. really creative people. now the jeepney is also a symbol of our this systemic problem.

jeepneys are commonly made up of groups of people. some own their vehicle. a lot don't. all they really care about is getting that fare because they're "feeling left out" like the whole wide world is against them because they're poor or out of luck. yet there are jeepney organizations and these organizations, i'm sure have funds. they should act like a business/corporation/foundation--- instead of doing all those strikes, put their money into making brightly colored and clean vehicles. put our famous filipino smile onto those jeepneys!

some of you may say, that should be the government's job. its a tourism question. well guess what, those guys have a lot of stuff on their plate and not enough funds to go around. jeepney drivers, operators and organizations all complain about how high the price of crude is, and how low their income is. well guess what, its the same price all over the world. and if you're saying that hey its easy for them because they earn in dollars. they also pay for their own morgages, their own food, their own education. i say its a proportional living wage. and the only solution to lighting up our situation is to do it ourselves, small steps if possible. may be then people will dispel the notion that all these labor, jeepney groups and "civil" society in general are all in it for the money they get from their sponsors abroad.

your point is well taken: jeepneys should be an excellent symbol of Filipino Culture and Pride. So why not put our famous Filipino smile onto jeepneys? And its got to be done by ourselves not by government, not by anyone else but Filipinos. if you want the filipino name to be more than a "domestic help" well guess what, encourage your family and friends working and living aboard to open up a small mom and pop operation that showcases whats good with our culture.

time to get out of a slump people. just *my* two cents.