The time to reinvent

The world will never be the same after COVID-19. Social behaviors have permanently changed as have consumer patterns. Trends in international trade have shifted, as have investment priorities. After two months in lockdown, nations must restart their economies in an environment that has changed drastically.

The silver lining is that it revealed the weaknesses in our institutions and our economies. As we rebuild, we must do so with an intent to reinvent, especially for us in the Philippines. We must work to make the nation stronger, more resilient and self-sufficient.

Let’s talk about the obvious first. Our healthcare system has proven to be acutely insufficient to support our 108 million population. As of the latest census of 2016, the country has a total of 1,224 hospitals (public and private) with a capacity of 101,668 beds. This works out to only 1.062 beds for every 1,000 people. International standards call for at least three beds for every 1,000 citizens. This means, government must increase our healthcare capacity three-fold.

Still on medical capacity, the Philippines is dangerously dependent on imports for nearly all its medical requirements. This is true for basic medical equipment, personal protective equipment as well as curative and palliative drugs. Unfortunately, pharmaceutical products and medical supplies manufactured domestically are too few and too narrow in range. This puts us in a dangerous position. During times of scarcity, we are at the mercy of countries that manufacture these products and our needs will always come second to theirs.

Thus, government must attract and liberally incentivize investments in pharmaceutical and medical supplies manufacturing. They are vital to the nation’s survival in times of lack.

The same goes for food production. Local production of rice, vegetables, meats and seafood are insufficient to feed our ever-growing population. We are dependent on imports for the lion’s share of our food requirements.

The recent disruption of the logistic chain, resulting from the Enhanced Community Quarantine (ECQ), would have led to a food shortage had government not intervened to quickly release food imports held-up in ports and facilitated their unhampered transport to wholesalers.

For rice, government had to play its diplomatic card to persuade Vietnam to continue selling rice to us. All these underscore how we cannot survive on our own food resources.

What we need is a green revolution to achieve self sufficiency in food production. This will require tremendous political will on the part of government considering the difficulty of the task, the amount of investments required and the temptation to simply import.

Attaining self-sufficiency in food requires the participation of large-scale industrial plantations as well as medium and small scale farmers. Agro-industries must be made into the cornerstone of national development where everybody participates.

Unfortunately, agricultural development is stymied by the Comprehensive Agrarian Reform Law (CARL). The five-hectare limitation in land ownership relegates farmers to subsistence farming and low productivity. Economies of scale cannot be achieved with such a small amount of land.

The need to amend CARL cannot be overstated. Another way of going about it, as recommended by economist Calixto Chikiamco, is to condone the debts of the agrarian reform beneficiaries to the Land Bank in exchange for removing the restrictions of CARL. Besides, only 25 percent of beneficiaries are up to date with their payments.

Fostering a green revolution requires a mix of government policies. Among them is to shift to technology-based farming which can be suitable even for urban or small tracks of land. Farmers must be provided with technology, better seeds, effective pesticides and other inputs to production. The state must penalize land owners who keep agricultural land idle beyond three years, especially if the land has access to irrigation and national roads. Conversely, the state must extend incentives to land owners who produce food crops.

Our farmers need to be protected from cheap imports especially during the ramp-up stage. Hence, non-tariff barriers on imported foodstuff must be set up in the same way the US, Japan and China have. This is to be complemented by a national promotions campaign to encourage patronage of local produce.

Small and medium sized enterprises must be incentivized to engage in agriculture and/or post-harvest food production rather than food retail, as they are inclined to do due to lower barriers to entry.

As mentioned earlier, trends in international trade and investments are shifting and we must take advantage of the changing times to boost national wealth.

The most significant change is that most developed economies are moving their factories out of China to decrease their dependence on the communist republic. In fact, Japan has recently announced a $2 billion incentive package for companies who repatriate back to Japan or to Southeast Asia.

Actually, multi-national companies have begun leaving China way back 2016 due to rising wages, expensive rent and more severe environmental and labor regulations. The Philippines missed that boat. Investors chose to move to Vietnam and Thailand over the Philippines due to uncertainty in our tax laws (which persist today with CITIRA law still pending), the absence of a supply chain, a government perceived not to honor contracts, expensive power costs and corruption up to the barangay level.

Now that a second wave of companies are leaving China, the Philippines, unfortunately, is still not a priority destination. It is Mexico and Vietnam poised to benefit most. The former due to its free trade agreement with the US and Canada and the latter due to its favorable tax climate, relative ease in doing business and low labor and power costs.

Government must do all it can to get its fair share of investments. If it does, it will quickly make up for the two million jobs lost due to COVID, give the economy the shot-in-the-arm it badly needs and help transform the country from a consumer led economy to one that is production driven. The long term benefits are enormous.

Last week, I sent a message to DTI Secretary Mon Lopez requesting that we start the conversation on how to get our fair share of investments from China. I could only hope that the DTI, and the entire government, gives this due attention as this opportunity will only knock once.

COVID-19 has rebooted the economy and we are forced to rebuild. Let us hope that government doesn’t squander this opportunity to reinvent the nation to one that is stronger, more resilient and self-sufficient.