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The Philippine economic reality

In his play Henry VI, Part 2, William Shakespeare’s character “Dick the Butcher” utters the line: “Let’s kill all the lawyers.” The legal profession interprets this to mean that it shows Shakespeare’s high regard for lawyers as the guardians of the rule of law. “Dick” was a follower of the rebel Jack Cade, who wanted to overthrow the monarchy.

But Shakespeare’s 16th century audience knew exactly what was meant. Lawyers were most often the agents of the Crown whose job was to use the legal system to further the financial needs of the King rather than to insure justice. The ordinary citizens suffered at the hands of the lawyers.

Today, Shakespeare might have said, “Let’s kill all the economists.”

In the last years we have seen great economic destruction, as governments have taken the advice of economists to solve the global economic problems that the advice of the economists created in the first place.

To understand how out of touch and, therefore, potentially dangerous economists’ advice can be, just listen to them talk about the Philippines.

There must be an official rule that when speaking about the Philippine economy, an expert must say, “The Philippine economy must diversify more” and “The Philippines cannot continue to rely on remittances.” Then everyone nods their head in agreement.  But no one ever thinks to question those opinions or if the statements are factual.

Twenty-five years ago you could accurately estimate Philippine economic growth by taking the growth in the agricultural sector and multiplying it by 1.5. The reason this was so accurate is because the country depended on agri production. In 1994 agri contributed 22 percent of the gross domestic product (GDP). In 2014 the contribution was 11.3 percent.

Our GDP composition is basically agriculture at 11 percent, industry at 32 percent, and services at 57 percent. Thailand’s by comparison is 12 percent, 44 percent and 45 percent, respectively. Indonesia comes in at 14 percent, 47 percent and 39 percent, respectively.

While it might be better to have more contribution by “industry”, the Philippine numbers are not that much different from similar regional economies.

Further, and this is important, within and part of the broad categories, 29 percent of the GDP comes from the export of goods and services, including our outsourcing industry. But where do overseas remittances figure into the picture?

The Philippines’s “net income from abroad” in 2014 was $60 billion, which includes remittances, foreign aid, and income and interest payments on foreign investments held by the government and the private sector. This does not include earnings from the export of goods or services like outsourcing. Remittances were $28 billion. Overseas Philippine investments were actually higher than remittances.

Of course, remittances are an important part of the economy, as are goods and service exports, agricultural, overseas investments and every other GDP contributor. But to say that the Philippine economy is not diverse or dependent on remittances is not supported by the facts.

Maybe this is something the economists should mention. The contribution of mining to GDP is twice to three times as much in Indonesia,
Malaysia and Vietnam.

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