The recent announcement of the country’s first half economic results should bring the government back into the reality of what is the true story of the economy—not the statistically distorted one of last year.

Well the first half result supports this contention. There wasn’t a sudden softening of the economy’s growth, it was still much the same only now being more correctly reported. This is an economy where the dynamism and growth of its neighbors just isn’t there.

Last year’s real growth (as distinct from its statistical growth) was provided by only a few sectors. And those that created wealth rather than just added some service to it were depressingly small.

Agriculture is still at a subsistence level with rice and corn accounting for half (47 percent) of it. The high value crops that could bring farmers out of poverty are insufficiently accepted. And those that need large-scale fields to produce efficiently are being stopped by an ill-conceived Agrarian Reform Law that mandates all or nothing. All farmland must be under five hectares, nothing else is allowed.

Well, some crops require huge, mass production to be efficient. You just don’t grow sugar cane, or pineapples, on five hectares. At least not if you want to be competitive. And forget co-ops in these areas (they can work quite well in some areas of production, but not where huge scale crops are concerned). Even if they work, which too often they don’t, they just add an extra layer that adds extra expense. You mightn’t like it but this is a dog-eat-dog world today. If you’re not competitive, you get eaten. Someone else gets the business. It might not be fair but its reality.

Should there be an extension of CARP, it should also allow for the development of plantations, there’s room, and certainly need for both. Offer a man, a) 500 square meters with a house upon it and the potential for a vegetable garden in the back, plus schooling for his kids, a clinic for his family and a steady job or, b) five hectares (actually the average is a miniscule 1.6) with no ability to borrow on that land and low value crops to produce because you don’t have the expertise to go up-market, the need to pay for and build your own house, pay to get your kids to school and the hospital bills if they’re sick and I think I know what any thinking man would choose. But under CARP you can’t.

CARP is a market distortion, and like all market distortions, it will eventually fail. In fact, based on anecdotal stories, it seems it has failed already.

Manufacturing is collapsing, and this is not an exaggeration. The little that is manufactured here is historic, it was started when the market looked bright and international competition was less. There were no “made in China” goods or, soon, “made in Vietnam”. And tariffs were high, so local manufacturers were subsidized. Subsidized by the consumer who paid more for his goods just so someone could produce it here. That was a popular idea a couple of decades ago but it was a market distortion and didn’t work.

You don’t price to protect a few, you open up to benefit the many. There’s no reason a Filipino manufacturer can’t be just as efficient as a Vietnamese. No, that’s not true. There are some good reasons that businessmen can’t control. Such things as a labor code that dictates uncompetitive wages and that essentially guarantees employment no matter how poorly you perform are but two. I fully agree that the US$1.50 per day a Vietnamese earns is unacceptably low, as is even the US$5.60 a day Philippine minimum wage. But $1.50 is far better than $0, which is what about 3 million of Filipinos who could work, but have no job, get.

You might think the $1.50 a day should not be permitted but some 200 garment factories have closed in the last four years putting about 300,000 workers out of a job. The same thing has happened in furniture and I’ve no doubt a number of other industries. 

It would not have happened if there were flexible labor laws that adapted to world realities. Or, better, laws that gave the market dominance. It does, after all, know best.

What makes manufacturing look good in the statistics is just a couple of industries. Shipbuilding by Hanjin is a real plus, but its problems in Cagayan de Oro are putting half its business in jeopardy. And its poor safety record in Subic is raising questions about its continuity, and it is, after all, only one company. Last year, electronics accounted for 10 percent of manufacturing and 60 percent ($31 billion of $51 billion) of total export revenues. But of that $31 billion, only $5 billion is added in the Philippines. A world slowdown hits electronics hard—you can live without a new TV when things are tough as they are now. This January to May saw a 3.7 percent drop in electronics exports ($12.5 billion vs $13 billion) as compared to the same period last year, and that’s 60 percent of all exports. 

The support for the Philippine economy and what makes it grow are too few, and vulnerable to external factors it can’t control.

The need to create a fundamentally strong economy anchored on a wide range of competitive industries where when one is down another will be up is the urgent demand on the country’s leadership. One it had better address in a far better manner than it is doing today.

Pulse Asia found that a frighteningly high 75 percent of the public believe they are worse off now than they were a year ago. It’s a number the Social Weather Stations supports where its survey found a not much different 62 percent. Only 12 percent thought it was better. The net -50 percent was the worst ranking in 25 years, and makes a mockery of the President’s boast of the best economic performance in 31 years.

That fall meant that 59 percent now considered themselves poor—that’s 52 million Filipinos in poverty. And that “poor” was based on a minimal P10,000 per month. For a family of 5 (the average), this is a level of poverty that can’t be readily understood. And certainly can’t be accepted.

One shudders to think what the number is that live below what could be considered a modestly decent living standard. It’s not numbers anyone could be proud of. It is numbers that should call for some serious soul searching—and real action.

Because until real action occurs, real investment won’t. The Philippines attracted a miserly $720 million in the first half of this year. And if you take just three companies out of last year’s figures it was negligible then, too. Foreign direct investments are just not happening. That $0.72 million stacks up against Vietnam’s $11.3 billion—15 times as much.

I’ve suggested for the President to do one simple thing: Make it easy to start a business with but two procedures and two days to approve it, rather than the 15 procedures and 52 days it takes now. Even that simple thing hasn’t been done.

But, of course, there’s much, much else too. All of which has been well enumerated, it’s just a matter of getting it done. Let’s hope we’ll see such a flurry of action in the President’s last days.

The real story that’s coming out today of an economy in the 4 to 5 percent range with fewer jobs created than job entrants need is reason to take a serious look at the business environment and take the actions that have been long suggested to attract serious levels of investment. The local and foreign business chambers have been very vocal on what those are, so they’re well known, they just need to be done.

So what should be done? Here’s my two cents worth (with inflation I guess that two cents won’t be worth much, but anyway).

Focus on just four things so that full attention can be given to them and they can get done.

1. Bring education up to the level other countries have achieved. Twelve years as the basic; with $1,500 per child spent, the Asian average. Not the miserly $100 now spent. There should be about 650,000 classrooms nationwide to put a max of 25 kids in each room. The existing 421,000 rooms are obviously not enough. And certainly not 45 students in each room. Give them books and desks (chairs would be nice, too). Hire and pay the teachers well. Use the congressmen’s pork barrel only on education to help fund it. Make it fully free in public schools, including meals (not sacks of rice to be stolen).

2. Build infrastructure. Apart from anything else it will help stimulate this economy during this crisis by providing meaningful jobs, and giving companies orders to supply needed material, do construction work, etc. But that means first fixing a bureaucracy that can’t handle the work given to it.

3. Stop corruption so that the limited funds are efficiently used. But the first thing to do is to admit it exists otherwise there’s no hope of addressing it. The second is to put some big-time corruptors in jail, not just the little guys. That means nothing.

4. Get rid of the absurd security of tenure law. It does far more harm than good. You lose your job through poor performance someone else gets it—and works harder to keep it. No job loss, but increased productivity. The loser works harder next time.

Those four will do for now. There’s much else but if those four were dramatically improved, the well-being of Filipinos would be dramatically improved too. - ManilaStandardToday