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Tag: Numbers Don’t Lie
Last week, my good friend and Manila International Airport Authority (MIAA) General Manager, Eddie Monreal, invited me to the inauguration of the upgraded runway of the Ninoy Aquino International Airport (NAIA). As a certified aviation geek, I accepted the invitation, if only for the opportunity to stand in the middle of the runway and observe aircraft movements. Like I said, I am an aviation geek.
The decision is final. The Original Proponent Status (OPS) awarded to Megawide Corp. to transform the Ninoy International Airport Complex into a world class airport was revoked with finality by the board of the Manila International Airport Authority (MIAA). In its official statement, MIAA cited the lack of financial equity as the reason for cancelling the OPS.
The funny things about our politicians are that most of them know exactly what’s wrong with the country and the reforms needed to neutralize them. Sadly, however, vested interests get in the way and these reforms never see the light of day. For example, they all know that political dynasties work against national interests since they concentrate power in a narrow elite and make it nearly impossible for outsiders to win an election no matter how capable they are. Yet, the law banning political dynasties has been in legislative limbo for 35 years simply because the very people tasked to pass the law are themselves members of dynasties.
Filipinos are worried about the future of the economy — and for good reason. The heavy handed lockdown pushed many businesses to bankruptcy, especially micro, small and medium enterprises (MSMEs). While there is no exact data as to how many businesses have closed, a United Nations survey published last October gives us a good idea. According to the survey, 81% of Filipino MSMEs experienced income drops and customer loss. Sixty percent of businesses said they did not receive any support from the government.
According to the UK-based Center for Economics and Business Research, five ASEAN economies are poised to become economic powerhouses within 15 years. You will be happy to know that the Philippines is included in this list despite the economic blow of the pandemic. Vietnam, Malaysia, Indonesia, and Thailand have also made it to the magic 30 of largest economies by 2035.
The cold blooded killing of Sonya Rufino Gregorio and her son Frank Gregorio should serve as a wake-up call for us all. It is a morbid reminder of how morality, decency, and humanity have eroded among the police. Once trusted members of society, the Philippine National Police (PNP) has become a grotesque personification of the seven deadly sins — pride, wrath, greed, lust, envy, sloth, and gluttony.
When one is surrounded by disorder, clutter and chaos, one becomes desensitized by it. Such is the situation of Metro Manila residents. Like frogs sitting in a pot of slowly boiling water, residents of Metro Manila have been made to live with squalor, congestion, and the indignity of being a pedestrian, as if it were “normal.”
Psychologist Maxwell Maltz theorized that it takes 21 days for a particular course of action to turn into a habit. If this habit is practiced for 66 days, it becomes an automatic response. And if such a response is practiced for 180 days, it becomes part of one’s character.
Our economic managers had done a fairly good job until the pandemic struck. Although economic reforms towards improving the business climate and attracting foreign capital have been few and far between, they nonetheless managed to eke-out GDP growth of 6.4%, on average, in the last four years. Inflation was tamed, debt levels were controlled and poverty rates were declining.
I recently met Andrés Ortola, the general manager of Microsoft Philippines. Over lunch, we spoke about how he is adjusting to life in the country and his plans for Microsoft. The Philippines is an important market for the software giant given the size of our population and the country’s rapid pace of economic development. Although Microsoft Philippines has an annual turnover that is slightly lower than its Indonesian and Malaysian counterparts, the prospects for growth are higher here given the wave of digital migrations that is underway in government.
Something that Singapore, Malaysia, Thailand, and lately, Vietnam, have in common is that they all adopted the tried and proven Asian formula for economic development. Each pursued rapid industrialization by attracting foreign capital, by building their manufacturing competencies, and by exporting their way to prosperity. Within a generation, these countries have become high or upper-middle income economies.
Last month, the International Monetary Fund announced that Vietnam will surpass the Philippines in terms of per capita income by the end of this year. This comes on the back of Vietnam’s decisive anti-virus response which significantly insulated it from the pandemic’s economic blowback. Vietnam’s economy is poised to grow by 3% in 2020 while the Philippine economy will likely contract by a massive 9%.
Like many professionals, the seven months in quarantine pushed me to reassess my values. I realized that the accumulation of wealth and the consolidation of power does not define success — neither does recognition nor fame. In the end, it is our relationships, our health, and our wellbeing that matters. I realize that this may read like a cliché, but it does not make it less true.
Businesses were so complacent in the pre-COVID days that innovation was something done only when absolutely necessary. Most companies resisted innovation as it usually entailed large investments and required management to step out of their comfort zones. Innovation is always expensive and hard.
Anyone who has recently landed or departed from the Mactan-Cebu International Airport (MCIA) will attest that it is both an architectural and operational triumph. MCIA represents redemption for the Philippines after having had the infamy of operating the worst airport in the world in previous years.
Red tape and over-regulation have been the perennial problems in doing business in the Philippines. For local businesses, it is a source of stress and an unnecessary obstacle that erodes productivity. For foreign investors, it is reason enough for them to invest in Singapore and Malaysia rather than the Philippines. So severe is our red tape that for the year 2019 (evaluation period 2018), the World Bank ranked the Philippines 124th out of 190 countries in terms of ease in doing business. Within ASEAN, the Philippines was only better than Cambodia, Myanmar, and Laos.
In August 2016, the economic ministers of Canada and the ASEAN agreed to co-sponsor a study to determine the economic outcomes should an ASEAN-Canada Free Trade Area (FTA) be put into effect.
As I write this, thousands of companies are under pressure to re-invent their businesses to adapt to the new normal. Products must be re-engineered to better suit home consumption, distribution channels must shift to direct deliveries, and brick and mortar retail outlets must morph into online stores. All these must be done in a matter of months or for as long as cash runways lasts.
All around us, businesses are closing, millions are losing their jobs, and for the first time in decades, swaths of our population are entering poverty, not escaping it. The Wuhan virus has caused havoc to our economy and around the world. But how bad is the situation exactly? Through numbers, this piece describes the severity of the situation here and abroad.
The pandemic is not exclusively a story of business failures. Many companies are doing exceedingly well during this period of crisis. Those whose businesses relate to sanitary products, healthcare products, drugstores, supermarkets, and e-commerce continue to enjoy unprecedented profits despite the economic downturn. Some enterprises are hardly affected. Those engaged in manufacturing, importation and trading as well producers of basic food products remain stable. For them, it is business as usual.
President Duterte may be enamored by China and may make overtures towards Russia, but there is no denying, the trust and confidence of the Filipino people belong to the United States. This was validated in a recent survey conducted by the Social Weather Station which showed that Filipinos’ trust quotient towards China was at an abysmal -33 points while the US enjoyed a +72 point rating.
With infection rates growing by a multiple of 2.2 times a month, it’s safe to say that our battle with the Wuhan virus will be long and painful. Its economic impact has so far been disastrous. With second quarter economic contraction plunging to an all time low of 16.5%, think-tanks agree that the economy will contract by at least 8% this year and joblessness will rise to 9 million.
The Philippines has a consumer-driven economy where 72% of economic output is attributed to private consumption. For decades, Filipino entrepreneurs have benefitted from brick and mortar stores. But all that changed when the Wuhan virus struck. Overnight, bustling restaurants, crowded malls and busy stores were empty. Retailers today only realize 15% of their pre-COVID sales, on average.
In the early days of the ECQ, the Department of Finance (DoF) announced that the economy could still eke out growth of .08%. A month later, it adjusted its forecast and predicted a contraction of -3.4. Last week, Moody’s Analytics said that the economy will likely contract more acutely at -4.5%. Meanwhile, 7.6 million Filipinos are now unemployed, five million more than in the beginning of the year. All these are happening amid the backdrop of a budget deficit which could reach 8.5% of GDP.
Had it not been for the work from home (WFH) arrangement, government’s quarantine measures would not have been sustainable. Corporations and citizens would have insisted on going back to work to survive — and this would have caused a spike in infection rates. Without WFH, the economy would have collapsed in a matter of months. Thus, it could be said that the WFH arrangement saved the economy while acting as an important tool in combating the Wuhan virus.
The tourism industry is among the strong drivers of the economy. Before the onset of the Wuhan virus, tourism accounted for 12.7% of gross national product (GDP) or roughly $46.5 million worth of goods and services. Its hefty contribution to the economy was achieved on the back of 8.2 million foreign visitors and more than 120 million domestic travelers.
British banking giant HSBC recently published its forecast for the Philippine economy and the outlook is bleak. After clocking-in a 0.2% contraction in gross domestic product (GDP) in the first quarter, the bank forecasts a deep contraction of 7% in the second quarter, another contraction of 4.3% in the third quarter, and yet another shrinkage of 3.9% for the fourth quarter. This will bring the full year contraction rate to 3.85%. The last time the Philippines posted negative growth was in 1998.
Thirty one leading business groups including the prestigious Financial Executives Institute of the Philippines (FINEX), the Management Association of the Philippines (MAP), the Philippine Chamber of Commerce and Industry (PCCI), GoNegosyo, and the Chambers of Commerce from the Americas and Europe recently signed a manifesto expressing their support for the passage of the Corporate Recovery and Tax Incentives for Enterprises Act or the CREATE Law.
The prognosis for the economy is becoming progressively worse. Last month, our economic managers were hopeful that 2020’s gross domestic product (GDP) would expand by 2.5% on the premise that we are able to catch up on the second semester. Two weeks ago, the National Economic and Development Authority (NEDA) adjusted its forecast, saying that the economy could no longer post positive growth and that we are now looking at a contraction of 2% to 3.4%.
THE RETAIL TRADE is among the hardest hit industries in this COVID crisis. The bloodbath has cut across all sectors -- from clothing to food, appliances to motor vehicles, electronics to gasoline. No sector is spared except for those relating to health, sanitation, and wellness.
Despite our fervent hopes for gross domestic product (GDP) growth in the four to five percent range, the National Economic Development Authority (NEDA) announced last Thursday that it actually contracted by 0.02% in the first quarter. This was due to the combined effects of Taal Volcano’s eruption in January, the tourist travel ban in February, and the enforcement of the Enhanced Community Quarantine (ECQ) in March. This is the first time the economy contracted in 22 years.
Governments around the world have a conundrum. Should they order longer quarantine periods to flatten the pandemic curve even if it would mean a longer and deeper recession? Or should they shorten their quarantine periods at the risk of instigating a second spike in infections?