OPINION: Duterte economic program needs a revolution

Jose M. Galang

Posted at Jun 22 2016 03:21 AM

Even in its updated version, the incoming Duterte government’s economic reform agenda looks and sounds so 1980s. 

Instead of aiming for “revolutionary” goals that will excite, the economic program presented by the incoming economic managers to the business community early this week appears very much like a compilation of old plans and initiatives pursued by past administrations. Many of these initiatives are now yielding results from which more and more Filipinos benefit.

The 10-point reform agenda presented to the business leaders and a few other sectors invited to the Davao event projected the incoming government’s outlook that is insular in outlook. The agenda represents baby steps toward accelerating the current economic growth, lacking the bold strokes that will bring the Philippines more in step with its advanced neighbors.

Medieval concerns

While the focus of the incoming Duterte administration’s economic program is still confined to such medieval concerns as tax rates, land reform, tariff rates, revenue collection, bureaucracy streamlining, level business playing field, the rest of world has set its sights on economic transformation that is led by technology and innovation.

True, the items in the economic agenda are necessary to sustain economic growth — in some cases to speed up such growth — and make the gains more inclusive. It correctly observes that the current pattern of high growth fueled by widening income disparity is unsustainable.

Even if all the targets set in the Duterte economic agenda are achieved, it could still be possible that the resulting overall level of socioeconomic development will be a couple of decades behind present-day needs of millions of Filipinos.

There appears to be a need for the incoming Duterte government to expand its horizon and embrace the nascent global industrial revolution that is anchored on a “fusion of technologies”. Policymakers in the new administration still concentrate on parochial concerns while their counterparts across the seas are looking at modernizing their economies and systems.

For instance, in many of the country’s Southeast Asian neighbors, industries are adopting technology-based strategies to make their business models more profitable, the World Economic Forum’s (WEF) head of employment and gender initiatives, Saadia Zahidi, said in a report she wrote coinciding with a WEF conference early this month in Kuala Lumpur, Malaysia.

In much of Southeast Asia today, Zahidi said, new and old technologies co-exist and businesses are finding profitable ways to bridge these worlds. “From retail to manufacturing to telecommunications to transport, new business models — and new job opportunities — are emerging,” she noted.

Fourth Industrial Revolution

This trend is part of what is now being referred to as the “Fourth Industrial Revolution” that is taking place in much of Southeast Asia and across other developing countries. This technology-driven revolution, said WEF founder and executive chairman Klaus Schwab in a separate article in the Foreign Affairs policy journal, “will fundamentally alter the way we live, work, and relate to one another”.

Schwab recalled that the First Industrial Revolution (which started in 1784) used water and steam power to mechanize production. The Second Industrial Revolution (1870) used electric power to create mass production and initiate division of labor. The Third Industrial Revolution (1969) used electronics and information technology to automate production.

Looking at the present state of the Philippine economy, it is evident that local policymakers have failed to adapt to these transformations and instigate domestic industries into modernizing themselves. The Philippines obviously needs to now take note of the emerging Fourth Industrial Revolution if it wants to make profound improvements in the Filipino standard of living.

The speed of technology breakthroughs under the Third Industrial Revolution will pave the way for even faster transformations under the Fourth, according to Schwab’s prognosis.

“When compared with the previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance,” Schwab said.

For example, there are “unlimited” possibilities that await people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge. In the Philippines, mobile phones can be used by farmers to get timely advice on planting techniques and weather information and market prices that can help them make plans.

Schwab said further that possibilities will be multiplied by emerging technology breakthroughs such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.

Greater inequality

What the developing countries like the Philippines should watch out for is the possibility that the Fourth Industrial Revolution could yield greater inequality, particularly in its potential to disrupt labor markets, as some economists have warned. Automation in work places could cause a net displacement of workers by machines that might exacerbate the gap between returns to capital and returns to labor, said Schwab.

In her article, Zahidi said countries in Southeast Asia are facing a potential talent shortage in the face of the Fourth Industrial Revolution. She cited findings of a survey of CEOs in the region indicating “acute talent shortages in Myanmar, Cambodia, Laos, Thailand and Vietnam. On the other hand, the Philippines, along with Indonesia, Malaysia and Singapore, ranked highest in terms of talent availability for the emerging industries.

Workers in lower-skilled roles, said Zahidi, could face a jobless future in the Fourth Industrial Revolution, and that collaboration between governments and business to strategically redesign the regional talent value chain will be one major step in ensuring that people are able to live up to their full potential.

When the Duterte government sets out to pursue its change agenda in full blast, it will need to be on the lookout for an economic transformation that will make some jobs vanish. That will be worse than the effects of the ENDO system.

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Disclaimer: The views in this blog are those of the blogger and do not necessarily reflect the views of ABS-CBN Corp.