Leapfrog

This is not an easy time for the Philippine economy.

Our currency has been hammered down by the mighty dollar. Our agriculture has failed us and we are forced to import food. Our traditional exports have lost their foreign markets. No one buys our abaca, our tobacco, our coconut oil and, much less, our overpriced sugar anymore.

We still export bananas, of course. But it is a low-value, high-volume crop that is not about to boost our gross international reserves, depleted over the past few months by a high oil bill and weak exports.

The depreciated peso inflates our foreign debt. Last week, our debt obligations crossed the P13-trillion threshold. We will need more pesos to manage our debt service. We will have to find a way to produce those pesos somehow.

This year, the consensus is that our GDP will grow by 6.5 percent. But the growth next year will be slower due to the base effect.

By any measure, a 6.5 percent growth rate is fairly respectable. Consider that we are growing our economy in a most inhospitable time. Inflation wreaks havoc everywhere. The industrial economies are likely on the brink of a recession. The global economy will grow but only slowly.

After over two years of fighting the pandemic, supply chains have broken in many places. The pandemic, according to some analysts, may have reversed the process of globalization. Everywhere, nations are trying to be self-sufficient in both their food sources and their manufacturing processes. That is bad news for economies such as ours that need robust trade to grow more quickly.

Thus far, we have not made any policy blunders on the scale Liz Truss, the new UK prime minister, inflicted on her economy. Just days in office, her government announced tax cuts. This is an inflationary move that contradicts the efforts of the Bank of England to control inflation by raising interest rates. It is like stepping on the gas and the brakes at the same time. The British pound sterling fell through the floor.

But not making mistakes is not the best goal of economic governance. Our leaders need to explore creative solutions to pull our economy out of the rut. The task falls not only on the national government but also on the local governments, given the devolution process.

For too long, local governments were content with minor interventions in their local economies. With small allocations from the budget, they built small things such as welcome arches to demarcate provincial and municipal boundaries. Such things might have no impact on the productivity of the locality, but it immortalized the petty elected officials who always had their names engraved for posterity.

We will have to learn to move beyond that. Local governments must lead in leapfrogging their local economies.

ABA Zone

An impressive initiative is being undertaken by the provincial government of Batangas. It illustrates how local executives might seize their comparative advantages to completely reconfigure their local economy.

With their world-class port as anchor, the Batangas LGU is now developing what it calls the ASEAN Batangas Access Zone (ABA Zone). The general strategy is to connect the Batangas port with “super ports” across the ASEAN region.

According to a news release by the Batangas LGU, the Zone “will feature a Smart Logistics Hub, a food port, a regional food terminal and a coastal access road that will connect Batangas International Port to Bauan Port.” By building a new gateway for trade with the rest of ASEAN, this initiative will help bring synergy to the industrial estates the province has been building the past few years.

The efficient logistics hub that the Batagas port provides will encourage even more investments to flow into the business-friendly province. The possibilities are immense for new businesses to open, especially those linked to the other Southeast Asian economies. This will open new jobs for the people of Batangas.

A company based in the province, AbaCore Capital Holdings, is working pro-actively with the strategic initiatives of the local government. The company has a huge land bank. This year, it sold land to the Gaisano group and a national meat-processing chain for both to expand their operations in the province.

In 2021, the company sold land to Starfleet Innotech Inc. for the development of a resort-like condominium/hotel. This should be attractive for expats setting up in the province or for the executives of companies expanding business in the locality.

AbaCore continues with the development of the ABA Energy Hub, a 103-hectare project designed to house various energy-related industries. Some land was sold to A. Brown & Company for the development of a natural gas facility.

The company is currently seeking approval from the Bangko Sentral ng Pilipinas for the sale of a 40 percent stake in PhilStar Development Bank (no relationship with this paper) to a consortium of local and foreign investors. This will help grow the institution as a major financing source for businesses in the province. The buyers are led by Demry Cheng, CEO of Dragon Media Network.

The comprehensive partnership between the LGU and local businesses ensures rapid economic growth for the province. With the higher regional profile to be created by ABA Zone, the province hopes to harness the dynamism of neighboring Southeast Asian economies to help uplift the local economy.

With this sort of partnership, Batangas should soon emerge as an important growth driver for the country.