Each country is unique. The Philippines clearly lacks some of the characteristics of Korean society. During this current stage of our development, our strong fundamentals can be listed as follows. The greatest of all is our demographic dividend. We are among the few countries in the East Asian region that have not committed “demographic suicide” through birth control programs. We still have a young, growing, English-speaking population, an asset that has not been diminished by the ongoing pandemic. Our fertility rate will continue to exceed the replacement rate (2.1 babies per fertile woman) for at least the next 20 years. In a world where virtually all developed countries suffer from rapidly aging populations, our median age of 24 will continue to support our two biggest growth engines, the massive remittances sent from overseas. Filipino workers and the incomes of 1.3 million educated workers in the BPO-IT sector. These two elements represent about 12 to 15% of our GDP.
With the other countries of the Indo-Pacific region, we will benefit from the advent of the Asian century. Today, economic power has shifted from the countries of the so-called American century (the 20e century) to those of the Asian century in which the three main territories of China, India and the ASEAN Economic Community will dominate the world in terms of economic growth and vitality. Through international agreements such as the Regional Comprehensive Economic Partnership Agreement (RCEP) of the ASEAN countries with Australia, China, Japan, the Republic of Korea and New Zealand, the Asia-Pacific region challenges trends in other parts of the developed world towards ultra-nationalism and inward-looking trade and investment policies (eg America First, Brexit). The Philippines can take advantage of the trade and investment opportunities opened up within the world’s largest and most dynamic economic region. We can call this our “geographic dividend”. This would, of course, require the next administration after May 2022 to complete the efforts of this current government to remove the many restrictions against foreign direct investment found both in some existing laws and in the Constitution.
Another fundamental element of the Philippine economy over the next decade is that it will shift from a low to middle income economy to an upper middle income economy. We can call it a time dividend because the timing of this transition is perfect. As more and more of the 110 million people in the Philippines today (and who continue to grow at nearly 1% per year) join the upper-middle income category, their demand for more sophisticated consumer and industrial products will increase. exponentially, according to Engel’s law. Since over 70% of the Philippine GDP comes from consumer spending, growing consumer markets will attract local and foreign businesses, large and small, to invest heavily in the country. The main driver of growth will be the domestic Philippine market, with exports increasing only to the extent that we need to import a number of capital goods and raw materials that we do not produce in the Philippines. This large domestic market will be more evenly distributed across the major economic regions outside the National Capital Region, which had grown slower even before the pandemic compared to booming areas like Calabarzon (with Batangas as the epicenter). ; Central Luzon (with the Pampanga d’Angeles, San Fernando, Clark-Subic triangle as its center); the Visayas (with developments coming out of the congested Cebu metro towards Iloilo which has been given better infrastructure over the past decade or so); and the island of Mindanao (with Davao and Cagayan de Oro as agro-industrial centers).
Finally, like Indonesia and Vietnam, the Philippines is well endowed with natural resources such as minerals, very long coasts which provide abundant aquaculture resources, and thousands of islands which can be the base of a tourism industry. flourishing, both domestic and foreign (from 2024 and beyond, once the world is able to reasonably control the ongoing pandemic). With the Build, Build, Build program under the current administration which has supported infrastructure spending at the level of 5-6% of GDP, more and more attractive tourist destinations in this archipelago of more than 7,000 islands are becoming more accessible to and foreign tourists. Here it can be noted that one of its islands, Palawan, has been dubbed the “best island in the world”, according to a survey by a renowned international travel magazine, Travel + Leisure. This island paradise (one of the 2,000 islands in the province of Palawan) tops the list of the 25 best islands in the world, a title it held in 2013, 2016 and 2017. Among the many islands in the Philippines, there are many others, like Palawan, are appreciated for their sunny beaches, evergreen nature trails, endless entertainment and local culture. (Filipinos in general are known to be exceptionally friendly, hospitable, and “incredibly laid back.”) The Philippines can be “the Spain of the Indo-Pacific region,” attracting some of the hundreds of millions of tourists expected to come from China, India, Japan, ASEAN Economic Community and South Korea, among others. Again, this is the advantage of being at the epicenter of the most dynamic economic region for decades to come. Once people around the world see COVID-19 as just ordinary flu, overseas travel will resume and the Philippines will be a major beneficiary of the strong rebound in foreign tourism in 2024 and beyond.
Already, the mining sector, in the early stages of the post-pandemic recovery, is benefiting from soaring copper and nickel prices. As reported by Karl Ocampo in The Filipino Daily Investigator (September 3), the value of metallic mineral production of the Philippines increased by 25% in the first half of 2021 compared to the same period last year. The prices of base metals like nickel and copper jumped 40% and 65%, respectively; while precious metals like gold and silver rose 10% and 59% respectively. The lifting of the suspension of the issuance of new mining permits through Executive Order 130 has changed the situation. The long-term outlook is bright despite a possible reduction in demand from China. Other important sources of demand will be the huge infrastructure projects of countries implementing their own Build, Build, Build programs such as Indonesia and Vietnam, always trying to catch up with the quality of the infrastructure of their neighbors in Asia. from the North East. The efforts of a large economy like the United States, whose legislature recently approved a $ 1,000 billion budget to renew its aging infrastructure, are also important in stimulating demand. This very bright outlook for the infrastructure sector, both at home and abroad, is one of the main reasons why I think the 40-year NEDA projection underestimates the strong rebound in capital investment in the industry. post-pandemic era. The years 2020 and 2021 will literally be just one hit in the long-term trajectory of Build, Build, Build.
Despite their relatively small area, the Philippines is one of the richest countries in the world in terms of mineral resources. It still has untapped mineral wealth worth at least $ 840 billion in gold, copper, nickel, chromite, manganese, silver and iron. This is 10 times the annual GDP of the country. In a special report published in Global Financial Magazine, it was pointed out that Philippine mining is increasingly taking environmental sustainability into account. In an effort to align with the government’s continued focus on ensuring the environmental sustainability of all mining activities, the Philippine Chamber of Mines recently adopted the Towards Sustainable Mining (TSM) initiative, led by the Mining Association of Canada, one of the world references in the extractive mining industry. TSM will provide the mining industry with “tools and indicators to boost performance and ensure that key mining risks are responsibly managed to meet society’s needs for minerals, metals and energy products in the most efficient way.” socially and environmentally responsible ”.
To be continued.
Bernardo M. Villegas holds a doctorate. in Economics from Harvard, is Professor Emeritus at the University of Asia and the Pacific and Visiting Professor at IESE Business School in Barcelona, Spain. He was a member of the Constitutional Commission from 1986.