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(Conclusion)
Investment is another critical keyword. The reason the Philippines is lagging behind well-off countries like China can be found right inside its balance sheet.
If you know a company that keeps growing only its sales by single digits because it it invests all it has on increasing headcount and nothing is left to put into technology, infrastructure or education to increase its productivity, then you may think the company will not take off. The company that will thrive is the one that knows that ifyou only give a hammer an nails to a person, he can make one table a day. If it wishes to increase its output to 15 tables, it can hire 15 people and you have 15 tables, or you can invest in equipment and training so that maybe only two people can produce the 15 tables.
As an analyst, it?s not difficult to see that the second company will probably fare better in the long term than the first one. Their products are more consisten and appreciated.
What we sorely lack is investments, whether it is foreign direct investments (FDIs) or local investments.
From 2001 to 2008, the Philippines only had $12 billion in foreign direct investments, which is less than Vietnam's $36 billion for the same period.
When compared to China's $500 billion investments in the same period, China, which has 15 times more people than our country, got over 40 times more investments than the Philippines.
One study says that because of these investments, China has 10 times the productive capacity than what their people are now buying.
Are we here? We import, because we can't even produce enough for our own use. This is why China continues to grow fast, and will continue to do so while our future prospects are still mired in question marks. Do we send more people overseas so that they will send money to the country ? money to buy imported products?
We also lag in local investments because of our low savings. When a Filipino earns $1, he spends over 95 cents of it. That?s why the household savings rate normally is below 5 percent. When a Chinese earns $1, he spends less than 70 cents, and therefore the 30 or so cents goes to the bank. The bank can make that money available to businessmen for them to invest.
There?s another reason for our low investments. What little we save is not lent to businesses but to the government which borrows to cover its own deficit. As a consequence, you see a structural problem ? in 2008, consumption was over 70 percent of the country?s GDP, while investments was only 14.2 percent of GDP. In contrast, China?s GDP is 42 percent investments, while India is 31percent investments. Even Thailand has over 25 percent of investments.
This lackadaisical attitude to investments permeates our whole bureaucracy. They continue to pay lip service to its importance, but the funds to promote it, and the legislation to support it is long in coming.
A candidate for president probably spends more money in one campaign to promote himself than the government spends to promote investments in a whole year.
The Cebu Investment Promotion Center (CIPC), despite its tangible results, continues to be hounded with budget problems and only gets a minuscule percentage of the city government's budget. Yet it is already the best in the lot of local government units (LGU). Other LGUs spend way less.
You know what happens to a company that says sales is important, but spends less than 1 percent of sales for sales and marketing? It gets clobbered in the marketplace.
Last May, I attended the Korea-ASEAN CEO Summit attended by over 2,000 top executives. The leaders of Korea, Thailand, Indonesia, Cambodia, Singapore, Malaysia and Vietnam took turns to take that opportunity to pitch for their country. The Philippines? leader begged off from her speaking slot to meet a few select private businesses. Another opportunity lost.
When a dollar is spent on investment, there are ripple effects as this provides jobs and returns in subsequent years. When a dollar is consumed, that is normally the end of it, and nothing shows up afterwards.
Because we lack investments, we lack the businesses to provide jobs. So even if close to a million of our people migrate overseas every year to look for jobs, we will still have a significant unemployment and underemployment problem. This is because what little is earned or remitted from overseas is spent on consumption.
I know investments create competition, and as a businessman, I have to think twice about it. But after seeing so many countries advance, we have to believe that it is better to share the ocean with competitors than have a small pond all to ourselves.
What is the remedy? Investments and more investments. It's not too late, we need money, and lots of it. However, it is a little bit late to lament or stop the rain for the next 30 minutes, if the water level has already reached the second floor of the house. We understand that we should be producing less children but then we have already overproduced by the millions. We need high horsepower pumps, and lots of them, because there is so much water to extract and pump out.
Among our 92 million people, over 30 million are less than 20 years old, and they will expect to be properly educated, trained, and given opportunities to work when they are ready. This is a huge number ? 50 percent more than the population of Taiwan or Australia, and probably equal to the population of Malaysia or Canada.
Over 10 million Filipinos are overseas. We can?t expect to export another 20 million because we have no factories or infrastructure to give them jobs. China may have overproduced babies in the ?60s and ?70s, but these were the people who propelled their economic miracle in the 90s and beyond, mainly because there were investments, and opportunities, and they were properly educated and trained for that boom. We should do likewise.
