THE Philippines is riding high these days, first with the successful hosting of the Asean summit and second with the higher than expected economic growth rate of 6.9 percent in the third quarter. But even as the country relishes the good news, its leaders better keep an eye on what lies ahead.
There are probably at least three threats abroad that need attention because of their likely impact on the domestic economy— the development of artificial intelligence, the political situation in Saudi Arabia, and closer to home, the nuclear threat from North Korea.
On artificial intelligence, or AI, the threat is the probability that it will spawn a substitute to human labor. In a speech earlier this year, Dr. Diosdado “Dado” Banatao, chairman of the Philippine Development Foundation, warned that AI could displace the estimated 1.3 million Filipinos working in the business process outsourcing (BPO) sector. Today, BPOs contribute about 10 percent to the aggregate economy, obviously a major driver of growth. Worse, AI could also threaten to replace many Filipinos working overseas, and that may impact remittances.
In a related development, the International Labor Organization, or ILO, has released a study warning that automation threatens the jobs of some 137 million workers in Southeast Asia, including the Philippines. At risk are those working in several manufacturing sectors, including those producing textiles, vehicles and hard-disk drives.
The second potential threat stems from the political jitters in Saudi Arabia, where companies and households employ millions of Filipinos. Earlier this month, Crown Prince Muhammed bin Salman instituted a crackdown on corruption. In the process, he has sacked and placed under detention several high-ranking officials, including his cousin Prince Alwaleed bin Talaal, a prominent billionaire who has stakes in Twitter, Apple, Citigroup, among others.
Critics of the Crown Prince charge that his actions are actually manueverings to consolidate power. Reports quoting Fitch credit rating agency said that the crackdown could bring about a backlash and create even more political uncertainty in the region. A political crisis in Saudi Arabia not only imperils the employment of Filipinos working in the Kingdom, but the jobs of millions of other Filipinos in the entire Middle East.
Of course, remittances from Filipinos working abroad also have been driving the Philippine economy for decades now. Like the BPO sector, it accounts for about 10 percent of gross domestic product, according to experts. Together, revenues from the BPO sector and OFW remittances make up the twin pillars of the Philippine economy. It would be catastrophic for those pillars to collapse.
The third threat is closer to home. North Korea’s nuclear weapons program, coupled with its advances in the manufacturing of intercontinental ballistic missiles, poses not only a military threat but also an economic one. If the rhetoric from Pyongyang and Washington were to escalate into actual fighting, two of the largest economies in the world – China and Japan – might be affected. And by extension, the world economy, especially those in this region, would also suffer.
Of course, the Philippines is within range of the North Korean missiles, but that’s not what we fear most. Our economy will not be spared even if the Philippines is not a combatant. As the saying goes, the grass suffers when elephants fight. Millions will die if fighting were to break out in the Korean peninsula, and it would arrest growth and create instability globally. Even with mere rhetoric, tensions have kicked off an arms race in the region that diverts resources that could be devoted to development.
Granted, policymakers and other leaders in the Philippines already have their hands full, so to speak. Domestic issues alone are more than enough to occupy national attention and cause sleepless nights. But effective administration requires leaders not only to focus on issues of the day, but also be on the lookout for potential threats in the future.
Leaders, including our economic managers, need to add to their present-day agenda moves that could address the problems of tomorrow – in case they materialize. If they delay action until the potential threats become reality, then we would already be doomed.