LAST week this paper published a report about Japanese-owned Epson Precision Philippines’s ongoing expansion plan in Lipa, Batangas, estimated to cost P4.7 billion. When completed in 2017, the project will add 6,000 to 8,000 workers to Epson’s current work force of 12,000.
The report quoted a company official as saying Epson has no plan to expand its factory in China because of the drastic increase in wages there, compared to the Philippines, where labor cost is stable and competitive.
Epson’s expansion project confirms previous reports attributed to a study by ANZ Bank, which said manufacturing companies were moving out of China and transferring to Southeast Asian countries, including the Philippines. The study cited cost-effective production as the main strength of the Philippines, together with Thailand, Vietnam and Indonesia.
ANZ Bank, according to a Bloomberg report, believes that “Southeast Asia will take up China’s mantle of the ‘world’s factory’ over the next 10 to 15 years.”
This is a huge opportunity to sustain the revival of the industrial sector, which will also boost employment. As the World Bank said, “things are looking good for the Philippines.” In its latest East Asia and Pacific report, the World Bank placed the Philippines in the ranks of high-growth economies in the region.
World Bank lead economist Rogier van den Brink said in a briefing that, while many countries in the Asia Pacific were facing aging populations, “the Philippines is facing a young work force, which finds itself in a highly advantageous region. So it’s one of those elements why we are saying things are looking good for the Philippines going forward.”
Some people may say that the optimism about the bright prospects of the Philippines has been dampened by the government’s report on the performance of the economy in the first quarter of 2015. The report showed the gross domestic product (GDP) grew by 5.2 percent, the slowest quarterly growth since 2012, compared with 5.6 percent in the same quarter last year and 6.6 percent in the fourth quarter of 2014.
The government’s economic managers admitted that the slowdown was due to the slower-than-programmed spending on public construction, which was also the reason GDP for the whole of 2014 grew by just 6.1 percent, compared with 7.2 percent in 2013. Government data show that government expenditures, particularly on construction, in the first quarter of 2015 were 13 percent below the P582.2-billion target.
As it did in 2014, when it fuelled growth in spite of government under-spending, the private sector took up the slack in the first quarter of 2015. Economic Planning Secretary Arsenio M. Balisacan said growth in the private sector in the first three months of 2015 “remains robust.”
In the first three months of 2015, public construction shrank by 24.6 percent, a reversal from the 17.5-percent growth a year ago, according to the National Statistics and Coordination Board (NSCB). On the other hand, private construction increased by 14.2 percent in the first quarter of 2015, a turnaround from the 5.1-percent contraction in the same period last year.
The economic managers have given assurance that the underspending issue would be addressed, and that public spending would be accelerated in the remainder of the year, to meet the GDP growth target of 7 percent to 8 percent.
I don’t think the disappointing performance of the economy would discourage the private sector, including domestic industries, from pushing through with expansion plans to take advantage of the country’s increasing competitiveness.
Our fundamental strengths, like the young population, remain intact. Oil prices remain low, which translates to lower cost of production. Remittances continue to grow in spite of conflicts in some host countries for overseas Filipino workers.
The business-process outsourcing industry continues to attract investors, and the real-estate boom is nowhere near its end. We are still among the fastest-growing economies in Asia Pacific, but that should not lull as into complacency. In recent quarters, the Philippines was the fastest among the major economies of the Association of Southeast Asian Nations and second only to China in Asia.
In the first quarter of 2015, however, the Philippines fell behind Vietnam, which grew by 6.03 percent, and Malaysia, which grew by 5.6 percent. China remains the leader, with a GDP growth rate of 7 percent.
Notwithstanding the first-quarter performance, I believe a full-year growth of 5 percent to 6 percent is a given, based on our strong fundamentals and the robust performance of the private sector. However, the government must accelerate spending, particularly on infrastructure, to achieve its target of 7 percent to 8 percent.
More important, the government must lead in solving the mismatch problem between employees and employers, mindful of the fact that domestic industries also compete with foreign employers who prefer to hire Filipino engineers, architects, accountants, industrial technicians and other skilled workers.
At worst, the economy may see a downturn in the next few years, but construction will continue because of the many projects that are going on and on the drawing boards. The Public-Private Partnership Program is not yet in full swing because only a few projects have been awarded, and fewer have reached the construction stage, so that’s another area where we can expect a construction boom.
As I’ve said over and over, we have a huge opportunity not only to sustain a fast-paced growth, but also to generate jobs for our people, which should lead to the decline, if not elimination, of poverty. There’s a Filipino word for missed opportunity, which we should not allow to happen: Sayang.
For comments, e-mail mbv.secretariat@gmail.com or visit www.mannyvillar.com.ph.