"Aquinomics" is not working and is headed for total failure.
The slowdown in the country's Gross Domestic Product (GDP) growth for the second quarter of 2011 highlights the fundamental flaw of relying too much on supposed external growth drivers from the volatile global economy. While there is certainly the base effect resulting from the artificially high growth last year due to the expensive presidential elections, a careful scrutiny of the details shows the basic issues that have long been undermining the country's economic development.
The slowdown in the second quarter GDP growth to 3.4% from 8.9% during the same period in 2010 is mainly attributed to the 0.6% decline in the industrial sector that offset the 7.1% growth in agriculture (due to better weather conditions) and 5% growth in the service sector. Behind the decline in industry is the huge 16.1% fall in construction specifically public construction which fell by 51.2%. This as the Aquino administration held back public investments in infrastructure development (now at a four-year low), which it plans to pursue through Public-Private Partnership (PPP).
But the PPP program has yet to take off as investors from the US, Europe, and Japan remain hesitant to invest in the Philippines unless more guarantees for their profits are given by the government. Amid the global financial and economic crisis, foreign investors have been more aggressive in seeking fresh incentives and maximization of their profits. Aquino has already promised to provide regulatory risk guarantee although this has yet to be formalized as policy due to legal issues. There are now proposals to remove the constitutional restrictions on foreign ownership of land, mass media and educational instituions. All these indicate how the country's infrastructure development and economic growth has become hostage to the interests of private and foreign capital.
Industrial contraction also resulted from the significant slowdown in manufacturing growth which decelerated from 13.2% in the second quarter of 2010 to just 4.8% in the same period this year. Export-oriented manufacturing is being dragged down by weak demand from the country's traditional major markets – the US, Europe, and Japan – which are all still reeling from the prolonged global recession.
Indeed, because domestic economic activity depends heavily on external demand and capital, the far-from-over global financial and economic crisis continues to weigh down the national economy. The Gross National Income (GNI) decelerated to a four-year low of 1.9% in the second quarter from a growth of 9.2% in the same period last year. Net Primary Income (NPI), which measures the inflow of remittances from overseas Filipino workers (OFWs), as well as net flows from foreign investments and trade, fell by 2.8%. While remittances from migrant workers continue to grow, its pace has slowed down considerably since the 2008 financial meltdown. In the first half of 2011, remittances grew by 6.3% (according to the central bank), a far cry from its scorching double-digit expansion prior to the crisis. Actual foreign direct investments that flowed in the country, also as measured by the Central Bank, fell by 16.6% in the first quarter of the year. Meanwhile, exports of electronic products, which account for more than half of total export revenues, fell by 10.8% in the first half of the year, with a huge decline of 48.3% in consumer electronics, according to the National Statistics Office (NSO).
Alas, the Aquino administration is not interested in implementing a drastic shift in the country's economic direction. Its Philippine Development Plan (PDP) 2011-2016, for instance, adheres to the same flawed development paradigm of neoliberal globalization. Like its predecessors, Aquino's PDP is skewed towards building the most favorable environment for profit-seeking foreign business and their local partners through programs like the PPP. The PDP also prioritizes export-oriented manufacturing especially electronics and foreign investment-reliant and foreign market-dependent sectors like BPO and extractive industries like mining. These areas are long held as supposed drivers of growth and employment but have until today continued to fail to induce sustained economic growth, much less address the chronic job scarcity and reduce poverty. They fail because while they may attract some capital and create some jobs, they are not anchored on any long-term national industrialization plan that promotes and relies on domestic production and consumption.
Even the much ballyhooed good governance campaign of the administration has been reduced to issues that affect investment decisions and cost of doing business in the Philippines. These include the enforcement of contracts and competition measures. To conceal the bankruptcy of globalization policies, Aquino is scaling up the foreign debt-funded conditional cash transfer (CCT) scheme.
By insisting on a development model that depends on unreliable external sources of growth mainly from the US and other advanced capitalist countries, the Aquino administration is oblivious to the glaring failures of past medium-term plans and the lessons of the ongoing global crisis.
Aquino's economic managers need not only review their economic forecasts, including the 2011 target of 7-8% annual GDP growth given the anemic performance of the economy in the second quarter of the year. More importantly, they will have to abandon the flawed PDP and failed economic priorities in favor of a genuine national industrialization program.
Aquino should not be surprised if there rising mass protests due to his failure to address the worsening economic crisis. #
from:www.bayan.ph
