We first heard the phrase “SM Economy” used by prominent economist Dr. Benjamin Diokno to describe what the Philippine economy has become, one that is driven by consumption fuelled by dollar remittances of overseas Filipino workers.
Gauging by the brisk sales in major supermarkets during the holiday season, the SM economy must be on a roll. We won’t be surprised if, after Bangko Sentral ng Pilipinas (BSP) bean counters tally final figures on dollar receipts from our heroes in foreign lands, the figure would most likely exceed the earlier projected $20-billion mark.
Leaders in the OFW deployment business consider the BSP figure conservative, saying that the central bank only counts remittances sent through the formal system, mostly money transfer through banks. They peg OFW money hitting at least $24 billion a year or about $2 billion a month.
Wow, that’s a lot of money! In today’s exchange rate, that is P86 billion in cash straight to the pockets of families of OFWs a month.
A big bulk of that money goes to groceries, and other basic food needs, education of the kids, shopping on clothes, other non-essentials and the like. If close to 100 million Filipinos are spending the bulk of their earnings on consumer goods, we wonder where all those goods come from.
In the first manufacturers’ and producers’ summit held late November, we were informed that those cheap goods are not made in the Philippines considering there are only very few local industries left. Instead, these goods come from factories in Taiwan, South Korea, China and more recently, Malaysia, Thailand, and Vietnam.
With very few local factories left, high school graduates and drop-outs have very slim chances of finding good-paying jobs. They end up doing odd jobs with little pay. The BPOs and other information technology-driven businesses are thriving but those recruit only college graduates with good command of the English language. The under-educated are out of that BPO loop.
In short while Pinoys, by their sheer number, are becoming a huge consumer market, we are producing less and less including food to meet the needs of our local market. We have to import consumer items — from underwear to hi-tech gadgets. Fact is we already incurred close to $9 billion in trade deficit as of last October; that may hit the $10-billion mark by end 2011.
This trend elicits some alarm bells for us and many others who believe that manufacturing is an economy’s engine of growth. While retail, BPO and other services have the potential to support economic growth at least in the medium term, the significance of the manufacturing sector should not be ignored.
Our neighboring countries are showing that their development is anchored on expansion of their respective manufacturing bases. Diversification of the economy, especially the manufacturing sector, is then a necessary condition for economic development (Yap and Del Prado 2007).
This is another situation that urgently calls for government intervention through better infrastructure and policies. A recent pronouncement from the Department of Trade and Industry giving more attention to industry development is one major positive step towards this direction.
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