Tuesday, October 03, 2006
Quo Vadis, Philippines?
“The Economist” in their September 16th issue provided a 19 page special report on the world economy. I summarized some of their findings, though if scrutinized are not new, which have some effects on us and our country.
1. There is a risk that the American economy will face a sharp financial shock and a recession, or an extended period of sluggish growth. This will slow growth in the rest of the world economy.
2. Countries that try to protect jobs and wages through import barriers or restrictions on offshoring will only hasten their relative decline.
3. Rich economies can grow only by inventing new technology or management methods. Poor countries should find it easy to grow faster because they can boost their productivity by adopting innovations from richer ones.
4. Asia worked its “miracles” by creating the right conditions for high investment: a high saving rate, open markets and a good education system.
5. The best way to boost national economic prosperity is to make labor and product markets work more efficiently.
Speed up the shifts of jobs from the old industries to better paying new ones, and improve education and training to prepare workers for tomorrow’s jobs.
Let us analyze it one by one.
1. It is matter of time that the economy of USA will cause a meltdown. Their more than S100 billion dollars deficit, their low saving rate and high consumer debts will mean devaluation of the mighty dollars and a crisis in the bond market. THERE WILL BE RECESSION IN AMERICA SOONER OR LATER. You have to think twice migrating there since there will be scarcity of jobs and high basic commodity prices. There is a saying in the business world, that if USA sneezes, every country catches cold. Therefore recession will reach the Philippines. What you will do? Spend only on the necessity, pay in cash (since in recession, interest rate will be high) and hold on to your cash. In this situation CASH is KING.
2. Expect more foreign companies to established offshoring business in the Philippines. Call Centers and Medical Transcription will still head to the Philippines instead of India because the latter is now getting expensive. If you are new graduates, there is a high probability that only call centers will welcome you.
3. It is a reality that all modern inventions that are transforming our lives came from rich countries. Our role in the flat world economy is to use these modern inventions to MAKE US MORE PRODUCTIVE.
4. If you haven’t heard it yet, Vietnam is overtaking us in terms of high investment, high saving rate and huge investment in education. This is rather discomforting. What we need to do:
4.1. We have to elect local and national leaders that favors investment and provide perks for investors. If your local leaders know only jueteng or STL as the source of capital, dump him.
4.2. We need to save a lot in any financial instrument available in the market. This capital can be used by the banks and the government to lend to investors or entrepreneurs.
4.3. With the current GMA administration it is unlikely she will allocate huge investment in education. Judging from the DepEd and CHED budget, the allocation will be used largely to pay the salary of teachers and personnels. The military is eating a lot of the budget. Is it a survival factor or what?
The current GMA administration is always willing and allocating resources to pay the soldiers. It is not bad per se. How about the good teachers? Since we don’t carry a gun and can not mount a coup, we can only appeal to their sense of justice. A warning though, you can not count on the good teachers to help create workers that are prepare for tomorrow’s job if they are starving, I mean really starving.
Mabuhay ang Pilipinas!