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More Good News

While the good news continues with the Philippine economy, another bit of good news came out recently, this time on a longer term outlook.

 

BusinessWorld (Jan. 23, 2013) published a news item on “Population ratios favorable for the Philippines”. The news item mentions ratings of population ratios of different countries made by debt watcher Fitch. Advanced economies are expected to have a rapidly rising proportion of elderly people (over 65 years old) in the next 30 to 40 years. Fitch cites the effect on the economy as high expenditures on health services. This could put pressure on the country’s finances.

 

Countries mentioned as having the worst ageing problem are Japan, Ireland, Cyprus, Luxembourg, Belgium, Malta, and Slovenia. The Philippines need not be concerned as it is in the top third of population ratios. For the Philippines, the ratio of the population 65 and over to the working population was a healthy 6% in 2010. This is expected to grow to 9.1% in 2025 and 16.3% in 2050. On the other hand, the figures for Japan are 35.5% in 2010, placing it in the bottom third, and 50.5% in 2025 and 69.6% in 2050.

 

Fitch focused on the effect on public spending on health. No mention was made of the fall in workers’ productivity with advancing age. Here then, it is also favorable to the Philippines.

 

Looking Longer Term

Let us take a broader look at the economy. If we look at history in the second half of the 20th century, the dominant economy was the United States. Its secret or formula included a population with critical mass (over 100 million) and growing disposable income, a large contiguous land mass, plenty of natural resources.

 

Looking at the Philippines, we can make the following observations:

 

  • We are approaching a critical mass.
  • Disposable income is not growing much for reasons we discussed last time – wealth goes to a few families.
  • Productivity is improving, due to quick dispersion of technology and favorable population ratio.
  • We have some of the other US ingredients, but not a contiguous land mass. Our archipelagic makeup is a big disadvantage.

 

There appear to be more favorable factors than unfavorable.

 

So, what does the future hold for Logistics? It would be safe to say that supply chain management will continue to be challenged by logistics requirements of the economy.

 

GDP per capita

As a consequence of our previous column, where we said that much of the GDP goes to only a few families, perhaps a change is warranted in measuring GDP per capita. Get the GDP attributable to the top 5% of the population. Subtract this top 5% GDP from the total GDP. Then calculate:

 

Effective GDP per capita = (Total GDP – Top 5% GDP) / (Pop x 96%)

 

Address inquiries and comments to Ed Sanchez at tel. 671-8670, fax 671-4793, cell 0918-914-1689, or email scmap.org@gmail.com. Those interested in DMAP training and other activities are requested to send their e-mail addresses.

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