> Business unhappy with Arroyo performance

Business unhappy with Arroyo performance
By Jose L. Cuisia, Jr.
Philippine Daily Inquirer
First Posted 01:50:00 08/15/2009

A recent article in a local daily quoted Philippine Chamber of Commerce and Industry president Edgardo Lacson saying, “…as far as the economy is concerned, they are satisfied because the country has not entered into a recession and they think the economy will grow by 1.9 percent this year.” Lacson is entitled to his view, but I disagree that the rest of the business sector is happy with President Gloria Macapagal-Arroyo’s economic management.

Many in the business sector feel the Arroyo administration has failed to deliver satisfactory performance based on these criteria: (1) competitiveness, (2) employment, (3) export growth, (4) foreign direct investments, and (5) fiscal stability.

Competitiveness. The World Competitiveness Yearbook last May revealed that out of 57 countries, the Philippines ranked 43rd in competitiveness, the worst among 13 Asia-Pacific countries. Based on four lead factors, we ranked 56th in supply infrastructure, 51st in economic performance, 42nd in government efficiency, and 32nd in business efficiency. The Global Competitiveness Index, published by the World Economic Forum last year, reflected equally depressing results—we ranked 71st out of 134 countries surveyed.

The most problematic factor cited for doing business in the Philippines was corruption. Foreign investors attribute the extent of corruption as one of the greatest hindrances to making long-term direct investments in the Philippines. In February 2008, the Hong Kong-based Political Economic Risk Consulting Group ranked the Philippines 8.35 in terms of corruption risk, “1” being the best score and “10” the worst. It added, “Although corruption is a major problem in a number of Asian countries, it is more politicized in the Philippines.” Transparency International’s Corruption Perception Index shows the Philippines suffering a significant deterioration in the eyes of the foreign community as its CPI continuously declined from a range of 40-55 during the 1995-1998 period to an embarrassingly low level of 102-141 from 2004-2008. It is sad to hear statements that the Philippines is perceived as the most corrupt nation in Asia.

It is distressing that competitiveness has deteriorated. Clearly, on this aspect the country has fared poorly under Arroyo’s administration.

Employment. Despite GMA’s repeated promise to create 1 million new jobs a year, the highest unemployment rate since 1992 of 11.8 percent was recorded in 2004 (source: National Statistics Office, Neda). During the Ramos administration, unemployment ranged between 8.6 percent and 10.1 percent. Arroyo allies may point out that the unemployment rate declined to 7.4 percent in 2008, but may not mention that the number of deployed overseas Filipino workers has ballooned from 686,461 in 1992 to 1,376,823 in 2008, totaling 8.1 million since 2001 (this may include some double-counting because some OFWs go home after the end of their contract then leave again for new jobs). Simply put, the current administration has not been able to create enough jobs locally.

Exports. The Philippines experienced resurgent growth in its export industries during the Ramos administration when export growth ranged from a low of 11.1 percent in 1992 to a high of 29.4 percent in 1995. Unfortunately, under the Arroyo administration, export growth has slowed to a range of 2.9 percent in 2003 to a high of 14.9 percent in 2006, slowing down further to 6.4 percent in 2007 and experiencing a negative growth of 2.7 percent in 2008. The Arroyo administration’s average export growth rate is only 6.34 percent, comparing dismally to the 18.9 percent average growth rate of the Ramos administration (source: National Statistics Office).

Foreign direct investments. The Arroyo administration can claim to have done better here than past administrations. The highest level net FDI of $2.92 billion was posted in 2006/2007 (source: Bangko Sentral ng Pilipinas). Average net FDI under the Arroyo administration (2001-2008) was $1.516 billion versus $1.369 billion average net FDI under the Ramos administration. However, during GMA’s tenure, we also lost two major long-term investors—Intel and FedEx which relocated to Vietnam and China, respectively. While the Arroyo administration attracted more direct foreign investments in terms of amount, the Philippines has nonetheless received much less FDI than Vietnam, Thailand, Malaysia and Indonesia.

Fiscal Stability. The highest fiscal deficit our country experienced (P210 billion or 5.3 percent of GDP) occurred in 2002. While the administration must be credited for convincing Congress to pass the Expanded Value Added Tax Law which contributed significantly to reducing the fiscal deficit to less than 1 percent of GDP, the Philippines continues to weaken in tax effort (tax revenues/GDP), declining from a high of 17 percent in 1997 to a low of 11.5 percent in the first quarter of 2009. The highest tax effort by this administration reached only 14.3 percent in 2006.

Assessing the above criteria, the Philippines’ performance under the stewardship of President Arroyo has been less than satisfactory and therefore I cannot agree with the PCCI view that Philippine business is happy with how the government has managed our economy.

(Jose L. Cuisia Jr. is a trustee of the Makati Business Club and chair of the Coalition Against Corruption. Please send your comments to makatibusinessclub@mbc.com.ph.)