The Philippine economy is now suffering from “Dutch Disease” but the affliction is not brought about by windfall earnings from the discovery of oil, but dollar remittances of Overseas Filipino Workers.
The diagnosis was made by University of Asia and the Pacific (UAP) economics professor Victor Abola on the state of the Philippine economy which he calls being held on even keel by OFW dollars.
Dutch Disease was coined as an economic malady after the Netherlands enjoyed a bonanza of dollar earnings after oil was discovered in the North Sea. Revenues from oil strengthened the local currency but new jobs were few, and poverty persisted.
“Our biggest problem is poverty,” Abola said. “Our economic managers thought that we can bypass the industrialization stage and jump to services to progress. It is not working,” Abola insisted.
What we need is not just one million new jobs a year. We need to create 1.5 million to 2 million jobs. That requires investments equivalent to one fourth of the Gross Domestic Product, he further explained. Foreign and local direct investments a year in the Philippines are one of the lowest in the ASEAN region.
What is happening is that, OFWs are subsidizing imports. Their remittances are covering the $12 billion in trade deficit recorded last year. That means, their money is creating jobs in countries that are exporting goods to us, not local jobs.
To build their industries, the more prosperous Asian countries kept their local currencies weak for decades, Abola elaborated.
Pioneer Japan did that for 16 years. The rest of the dynamic Asian countries kept their local currencies weak for no less than 25 years.
Today, there are more poor people in the Philippines than Indonesia and Thailand, the economic professor concluded.
Reposted — Abe P. Belena, PHILEXPORT News and Features