‘Consumption driven’

Mike Wootton

Mike Wootton

Well, the Philippine economy is certainly consumption driven, to a fault it seems and what is more the government pundits boast about it—well in the Philippines it is not something to boast about. China is trying to get their economy more consumption driven but the Chinese won’t spend money—the “savings bug” will be with them for a long time yet. Of course, there is nothing much easier than spending money in one of the many glittery shopping malls that continue to mushroom all over the place. Like the United Kingdom’s High Streets, they all have much the same outlets in them but occasionally you see something different, then you go back to have another look, and “poof” it’s gone! Something “a bit different” tends not to last too long around here.

Retail in the Philippines is big business, it accounts for about 15 percent of the gross domestic product (GDP) (33 percent of the services sector which itself is 56 percent of total GDP), and employs five million workers or 18 percent of the workforce. This, of course is, not just in the glitzy shopping malls; it includes sari-sari (variety) stores, the palengkes (wet markets), and the odd individual retail outlets that have managed to survive avoiding the malls.

Personally, I don’t much like shopping malls. My preference would be to walk down a street lined with small individual establishments where the shopper is recognized as being somebody who is important to the success of the business, and has to be “won over” and competed for in order to spend their money. This, however, is I know, a rather old fashioned view but it does support the consumption of “home made” products.

Much of the money that is spent in retail outlets is from the $14 billion a year remitted by the overseas Filipino worker community of about 10 million or 36 percent of the workforce. Filipinos, it seems, have a proclivity for shopping. Christmas is coming and providing the annual occasion for the regular gluttony of shopping; even this last weekend the traffic was getting very congested around the drop off points for the malls.

What are sold in the malls are rarely made in the Philippines out of natural products grown in the Philippines, thus what are sold are in the vast majority imported goods and the majority of those imports come from China, from which the Philippines sources 13 percent of its $78 billion’s worth per year of imports (based on official statistics and therefore not including the reported $20 billion per year of “smuggled goods” which if counted would knock the even now fairly dismal balance of trade figures very significantly).

From my observation, what is sold in the sari-sari stores and of course the palengkes are in fact mostly local day-to-day products, which because they are locally produced are less expensive and match the markets that they serve, which is a really big market in terms of numbers of people and incidence of purchases. The malls with their imported products cater to a notionally much smaller market but judging from the number and size of malls, the number of people using them and the rate at which they mushroom, the “mall market” still seems to be big, and more noticeably so in this run up to Christmas. But renting retail space in a shopping mall is expensive, and that expense has to be passed on to the customer. And isn’t it difficult just to go “malling” and not spend any money at all!

The more malls there are, the more sales of expensive imported goods there will be, and the more exporting will be required by the Philippines in order to offset massive import dependency; but consumption as a major contributor to economic growth will surely rise to keep Chinese and other exporter nations workers in jobs!

Rather than developing real estate for retail purposes, perhaps a bit more emphasis could be given to using those same investment monies for developing manufacturing facilities which would produce good quality products from local materials, and create jobs with higher skill levels than required for five million sales assistants and managers . . .? In the long run, short of a miracle or two or the creation of more real skilled jobs, the market for expensive imported consumer products must diminish.

Mike can be contacted at mawootton@gmail.com


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1 Comment

  1. I just like to correct your article a little bit. Total remittances sent through formal channels like the banking system and remittance companies last year was $23.8 Billion. This does not include money sent thru friends, relatives and small courier companies usually in cash. Experts estimate that money sent through this informal channel is around $5.8 Billion more than official figures so that would mean actual money sent is roughly around $52.6 Billion.