On Tuesday last week, economist Dr. Bernardo Villegas said in a financial forum that the country’s gross domestic product (GDP) will grow between 7.9 percent and 9.0 percent in the next five to 10 years, and will be anchored by a rapidly growing domestic market and the revival of the country’s manufacturing industry.
Philippine GDP grew by 7.2 percent in 2013, compared to 6.8 the previous year, according to government statistics.
While the projections of Dr. Villegas, who is the chairman of the Center for Research and Communications, will surely invite criticism for being too optimistic, the “Prophet of Boom” may be just right, if the country’s industrial sector will be truly revived. Surprisingly, Villegas left out of his projection equation the need to further boost farm output, which can help generate employment in the millions.
Besides a rapidly growing domestic market and the revival of the country’s manufacturing sector, Dr. Villegas cited the following factors that will contribute to his growth projections: a stable democracy; improving governance; strong macroeconomic fundamentals; labor peace; and the existence of a pool of educated, young and English-speaking workers.
Villegas also noted that the country enjoys a high rate of savings because of the robust remittances from overseas Filipino workers (OFWs), a large contributor to GDP.
Personal remittances from OFWs registered a record high of $2.4 billion last December, resulting in remittances of $25.1 billion for the full year 2013.
But even with the many positive factors cited by Dr. Villegas, there is no doubt that the country’s manufacturing sector needs a boost, while the contribution of the farming sector in employment generation should never be ignored.
One good example of the need for the country to boost its manufacturing sector is the car industry, which today is more likely an “assembly” industry. More than two decades ago, the Department of Trade and Industry set a target that vehicles assembled in the Philippines must have 40-percent local content, which was a very sound goal because that would result to the creation of more jobs. Has this target been achieved?
If most car companies simply source the engines, transmissions and body parts from abroad to assemble certain vehicle models in the Philippines, that means much needs to be done to make the local car industry a “real” industry.
For sure, there are more industries in the Philippines that largely rely on raw materials that have to be imported.
When it comes to the further development of the agriculture sector, there is still a need to pour in government money to build more irrigation systems, mechanize farms, and make the sector more resilient to climate change. More importantly, the smuggling of farm products into the country must be stopped completely, because that can potentially destroy certain sub-sectors in the agriculture sector and lead to loss of jobs.
Dr. Villegas’ projection of GDP growth of between 7.0 percent and 9.0 percent in the next five to 10 years may hold water, if government will give its support to the development of a robust manufacturing and farm sector in the country.
Relying on OFW remittances, the business process outsourcing industry, or the stock market to fuel long-term economic growth may not be enough, and can even expose the underlying weaknesses of the country’s present economy. A proof of the country’s weak economy today is the army of the unemployed and underemployed, who have never benefited from the current economic growth pattern.