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Thursday, October 19, 2006

Gloria’s freakonomics

Editorial: The Daily Tribune
10/20/2006

The World Bank (WB) representative in the country expressed amazement and at the same time frustration, which is shared by many, over why the Philippines, with all its attributes, remains an economic underperformer in the Asian region.

The country’s economy had grown six percent at its best for the entire period Gloria was in power and averages five percent from 2002 to 2005. The country’s yearly growth figures fall below par in the entire Southeast Asian region.

The country’s yearly growth, moreover, is largely being aided by dollar transfers from Filipinos whom Gloria is pushing away by the truckloads every day to work abroad.

The policy under the Arroyo administration is to continue depending on remittances for growth, something which is convenient for Gloria since billions of dollars in remittances every year are insulated from her poor economic policies.

Exports and productivity, which are the anchors of growth in other neighboring economies, have slipped progressively during her term to reflect the neglect the domestic economy has fallen into in terms of policies under Gloria’s watch.

In the ongoing Philippine Business Conference (PBC), trade groups would again, as what they do yearly, gather and try to make sense out of the economy which seems to be dragging on its way with heavy feet.

It does not take a bright mind, however, to know what has shackled the economy over the years to make it move below potential, as WB country director Joachim Von Amsberg said during the gathering.

Gloria, who moves about trying to remind everybody that she has a doctorate degree in economics, has been the main obstacle to growth over the years.
Government policies under her term change direction based on where the political wind and personal favor blow.

Von Amsberg said what the economy lacks to move in the same velocity as its Asian neighbors is coherent and consistent implementation of policies.

A prime example of Gloria’s policy inconsistency was the government’s tack on the confirmed oil reserves at the Malampaya natural gas field.

Gloria signed Executive Order 473 on November 2005 that, among others, gave the state firm Philippine National Oil Co. (PNOC) the task to develop the Malampaya oil field.

The executive order gave PNOC the option to employ a partner or a third party for the oil drill. With PNOC already in discussion with a Malaysian group for the project, Gloria issued Executive Order 556 which repealed EO 473 and now ordered all oil contracts involving Malampaya to be auctioned off.

There are a lot of other instances when private firms are thrown off balance by the ever-moving policies under Gloria.

Von Amsberg also cited in his keynote speech before the business conference that consumption spending is mainly fueling the economy and was the highest contributor to an economy in the region, accounting for 86 percent of average growth in 1991 to 2003.

Consumption spending is mainly the result of remittances from overseas Filipino workers.
Investment and net exports, which are the main cogs of development, have made the lowest contribution to growth.

He noted that dollar inflows from migrant workers should not be the main fuel of the economy of the Philippines which has much assets for development.

The output per worker in the Philippines was up by only 50 percent from 1961 to 2003, compared to 450 percent in other East Asian economies.

“This is not due to differences in educational attainment or human capital but to lower physical capital accumulation and productivity growth,” Von Amsberg said. He asked the question nagging all those living or who have been in the country.

With an educated English-speaking people, rich natural resources and strength in dynamic sectors, electronics, business services and remittances, why has the economy failed to fly?
Von Amsberg should have addressed the question to the political and economic aberration who is occupying Malacañang.

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