Conglomerates should be enlisted for growth

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Conglomerates should be allowed to show what they have to offer to the public in order to boost economic growth and prevent “development progeria,” an economist said.

Development progeria, University of the Philippines professor emeritus Raul Fabella told an Ayala-UP School of Economics forum, occurs when manufacturing sector growth lags services in a low-income country.

“In fast-growing catch-up economies, manufacturing grows faster than services. In the Philippines, services sector is now about 58 percent of GDP (gross domestic product),” Fabella explained.

Conglomerates should “enlisted” to shift the balance, which means that the government should provide and respect rules that allow private businesses thrive, follow contracts and allow reasonable profits.


“When enlisted … conglomerates made interesting contributions to the economy,” Fabella said.

The UP economist said conglomerates could greatly boost a state’s capacity for the provision of public goods and lower costs for governments.

An example of enlisting, he said, are public-private partnerships where the government assigns property rights to a firm and commit to rule-of-law contracts as the company develops the asset..

Fabella cited the Tarlac-Pangasinan-La Union Expressway, Cavite-Laguna Expressway and the North Luzon

Expressway-South Luzon Expressway Connector Road Project as the products of enlisted conglomerates.

Big businesses can also attract foreign investments and resources, like what happened after the privatization of Metropolitan Waterworks and Sewerage System.

“Conglomerates also compete in many markets, reduce market power and give consumers options,” Fabella said.

In terms of human capital, the UP professor said conglomerates were now also competing in non-elite tertiary education and supporting the trainings of teachers and scholars.

“Conglomerates can and do turn [the]pursuit of the of the bottomline into empowerment of the poor. For instance, tingi-tingi (literally, per piece) pre-paid SMS empowers the kasambahay (domestic helpers) and tricycle drivers, while it lowers cost for Smart and Globe and raises GDP (gross domestic product),” he said.

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