Business imperatives for recovery

Business imperatives for recovery What do we do now that the Philippines is way off-course from the development trajectory the government had plotted in 2022, as embodied in the six-year Philippine Development Plan 2023-2028? Without going into the numbers, suffice it to say that the government’s medium-term economic program has been badly derailed (we all know why), and desperately needs to be put back on course. I do not wish to dwell on the negatives; there’s been so much of that already in public discussions. I will also not dwell on what government must do to get us out of this mess. There is indeed much that our leaders must do to arrest our seeming downward spiral and put it back on track. But I find it hard to expect much from them at this time when the 2028 elections are already high in their minds. Indeed, the emerging 2027 budget shows signs that they have not changed their ways. Hence, I will instead turn my attention to what private business can and should do to constructively contribute to arresting and reversing the decline that has placed us back at the bottom of our Asean-6 peers in economic performance. I would sum up the business reform agenda in five words: invest, export, digitize, train, and compete. The first business imperative is to invest more, and perhaps more importantly, invest differently. Our economy is dangerously moving toward a tailspin, especially because investment is sliding, whether by government or the private sector, and by foreign or Filipino investors alike. It is tempting for the business community to respond to today’s uncertainty by simply waiting. I’d say resist that temptation, and effectively take matters into your own hands. Our country needs another wave of private investment, but not another wave of malls, residential condos or subdivisions, office buildings, retail outlets, financial services, and low-value business services. We have enough (and in some cases too much) of those, but the next investment cycle needs to be much more productivity—and export-oriented—thereby addressing the second imperative as well. In particular, I would hope to see our large conglomerates deliberately target at least one significant new productivity-enhancing or export-oriented investment. This could be in areas such as farm food (like cacao/chocolate, ube) or nonfood (say abaca, bamboo) processing, agricultural mechanization and modernization, advanced manufacturing, logistics, digital infrastructure, pharmaceuticals, medical devices, or exportable high-value services, among others. The last includes engineering, architecture, accounting, health care, education, software, animation, and tourism services. The aim is to transform our major corporations from inward-looking domestic-market companies focused on non-tradables into regional or global companies thriving on exportables. The scope for growth is there. We can see it in our recent real export growth that has defied our overall economic slowdown and cooling of global trade, growing by a multiple of our gross domestic product growth rate, and even in double digits. The third imperative is to invest aggressively in technology and artificial intelligence (AI). This is a particularly important opportunity because the Philippines now has a relatively high-cost labor force relative to Vietnam, Indonesia, and emerging Asian competitors. Cheap labor has long ceased to be our competitive edge; our selling point must now be higher worker productivity. This means companies must invest more in automation, AI-assisted work, digital supply chains, predictive maintenance, data analytics, digital payments, and cloud computing. AI must not aim to cut worker headcount, but to have higher-value Filipino workers, whose higher productivity translates to higher wages. The fourth imperative is about not simply complaining about the jobs-skills mismatch as if it were entirely the government’s responsibility, but helping create those skills themselves. This means more apprenticeships, company-sponsored technical education, company-school partnerships, paid internships, mid-career reskilling, in-company AI training, and engineering scholarships. The business process outsourcing industry has long done this because its business model depends crucially on human capital. Manufacturing, construction, agriculture, and logistics need to follow suit. Finally, Philippine business must cease asking the government for tax incentives, subsidies, tariff protection, import restrictions, special exemptions, and regulatory protection. While sometimes justified, they have collectively led our economy over the years into a rent-seeking equilibrium. The mindset must not be “Give us protection, and we will invest,” but rather, “Give us a level competitive business environment, and we will compete.” In the end, the government’s job is to make productive investment easier; business’s job is to make productive investment happen. —————- cielito.habito@gmail.com