On the country’s wanting competitiveness

It was interesting to be a kibitzer on the side, actually an armchair viewer from the comforts of my office, at the recent AVID forum. Though I wasn’t physically present, I sent a crew to cover the whole forum and from the footage of the coverage got some good insights from the venerable speakers at the forum.

The subject dealt with our sorry level of competitiveness as a nation and being an AVID affair, the discussion was tailored towards the needs and wants of our local automotive industry. AVID stands for Association of Vehicle Importers & Distributors, so all the top executives of all the vehicle importers and distributors in the country today were there. Philippine Star columnist, Cito Beltran very ably moderated the forum which had Mr. Jesse Ang, Country Head, International Finance Corporation of World Bank, Dr. Rafaelita Aldaba, Research Fellow of the Philippine Institute for Development Studies, Atty. Anne Claire Cabochan, director of International Trade Relations of the Dept. of Trade & Industry, Undersecretary Zenaida Maglaya also of DTI, Mr. Ryan Patrick Evangelista, Executive Director and COO of U-Act, and Ms. Fe Agudo, President and CEO of HARI (Hyundai Asia Resources, Inc.) as some of the eminent speakers.

The speakers gave their honest, no-holds-barred assessment of how the Philippines has slid down to the least competitive among the ASEAN nations and generally ranks among the lowest, even alongside the rest of the under-developed countries. They showed a video of Atty. Lailyn Barcenas, Associate Director, Asian Institute of Management Policy Center, who spoke of how the Philippines fared in a recent global competitiveness study. The Philippines ranked last, at No. 13. The study cited the lack of infrastructure and problem of governance as the culprits that hinder a country’s progress, as well as widespread bribery, graft and corruption, and it is here that the Philippines ranked no. 58, out of 58 countries! In short, the ultimate “kulelat”.

Mr. Jesse Ang  verbalized his sentiments very frankly as well, saying “Honestly, government programs have not worked this time.” He spoke of the ballooning deficits, of how our GDP, now at 13 percent should at least be at 17 percent, which we achieved during the administration of President Fidel V. Ramos. There is obviously a need to support the parts suppliers, and right now, our local banks are in a position to help this sector, but there seems to be a gap that must be addressed between this and the parts suppliers’ ability to secure the needed financing.

Dr. Rafaelita Aldaba gave a presentation about the strategic government action required in order for the country to achieve a decent level of competitiveness. A more coherent government policy was prioritized here, and I definitely agree that our history of getting into policy reversals involving major issues is one big red flag that puts off potential investors. Dr. Aldaba stressed the need for a more coordinated and cohesive government position, especially on international trade commitments.

To this, Atty. Anne Claire Cabochan, Director for the Bureau of International Trade Relations of DTI agreed fully, as policy reversals can only leave us open for retaliation by other countries, but then she is only one of hundreds or thousands of bureaucratic officials we have. Atty. Cabochan’s office at the DTI is responsible for negotiating all bilateral and multilateral treaties and she advised the body that the DTI has embarked on a massive information campaign starting Nov. 5 to disseminate information about the free trade agreements that the country has entered into. She also shared that in the ASEAN Free Trade Agreement, the importers of automotive parts account for 20 percent of the utilization rate of AFTA.

Dr. Aldaba likewise cited our lack of economy of scale and how the Competition Law which is being tackled now on the floor of our Congress could have advantages like discouraging cartels for instance, but our lawmakers must pursue it with caution as this can impact our ability to increase our economy of scale. More importantly, she cited the terribly high cost of production in the Philippines, driven largely by the enormous energy costs that we have. Currently, the Philippines has the highest energy cost among all the ASEAN nations, and we also have among the highest tax rates in the region.

Everyone is in agreement about the fact that the unreasonably high power rates in the country now has driven manufacturing industries into the red, ultimately putting them out of competition and out of business. No businessman that I know of discounts this tale of woe that has now become a national “buntong hininga”, but it seems we’re still way too far from finding a viable solution to this crippling problem. If we are to move on, this is one big problem we must hurdle.

Very revealing also is Dr. Aldaba’s verdict: “If we’re going to take a look at the level of competitiveness, the Motor Vehicle Development Plan has failed.”

Our previous stance of protectionism in the MVDP has obviously not worked. Mr. Jesse Ang said that “we have used protectionist policies far too long in our industries, and it just didn’t work.” We really need to learn to compete. Previously, for a company to be able to enter the automotive industry, it was mandated to source at least 60 percent of its total components from the domestic market, or it won’t be allowed entry into the automotive industry at all. Now, the government has started to make it a freer market, with companies free to source its components, though there are admittedly certain parts that are still highly protected and importers need to secure a permit from DTI. Still, it is a step away from our insular protectionist policies.

A sad note verbalized by moderator Cito Beltran was how we can no longer rely fully on the government any more—it takes a more pronounced and committed private initiative to get us out of this rut. Dr. Aldaba took exception to this, saying it was not all that bad. She puts a lot of stock on the ASEAN Free Trade Agreement (AFTA), as do the rest of the DTI executives like Atty. Cabochan, saying that AFTA presents a bigger market, providing a single production base and we really should take advantage of the opportunity that AFTA provides. The speakers were unanimous in that government should be a pro-active leader, with the private sector tapped for the much-needed finances to make sure that the Philippines emerges as a competitive nation.

The second part of the forum dealt with consumer protection, and USec Zenaida Maglaya ably took the cudgels for the DTI, reiterating their mandate to protect the Filipino consumer. To Cito’s observation that automobile manufacturers and importers complain about getting mired in the bureaucracy in LTO, the Undersecretary replied that DTI’s National Competitiveness Council is taking the lead in this area in addressing inter-agency problems.

Ms. Fe Agudo, speaking for Hyundai in the Philippines, spoke about the need for the automotive industry to gear both competition and consumer policies to give the motoring public better quality and low-priced automobiles and assure the buying public of adequate supply, as a way of participating in nation-building.

Over-all, it was a productive and informative forum.

Mabuhay!!! Be proud to be a Filipino. –Ray Butch Gamboa (The Philippine Star)