Salceda: PHL Should Now Cease as a Nation of Employees

Legazpi City (PNA) — The Philippines should now cease being a nation of employees and graduate to become a nation of responsible entrepreneurs through an entrepreneurial revolution backed up by a policy mix for investment promotion, among others, that could pave the way for a healthy domestic business formation.

Albay Gov. Joey Salceda dished out this solution in a recent media interview, pointing to what he termed as the country’s economic “structural imbalances” that does not favors low savers — the employees and pensioners — who have become the favorite victims of scammers.

Salceda, a respected economist, said the country “has so much idle savings, valued at about P3 trillion, enough to totally wipe out poverty” but which are not being properly used due to such economic imbalances.

Quoting a World Bank 2013 chart on Philippine Investments and Savings, the Albay governor said “the country at present has high savings rates at 42% of GDP and low investment rates 22% of GDP that combine to create a huge pool of idle funds estimated at about P3 trillion, which naturally seek a parking space. Thus, it becomes a market for mischief to exploit.”

He pointed out that treasury bill and bank deposit rates are very low so investors seek higher rates elsewhere, adding that low borrowing rates should encourage greater risk-taking in investing.

Salceda also noted that the stock market “has risen from 2,400 to 7,600 but retail local participation remains low, and its breadth and depth in relation to underlying GDP remains low at P8.2 trillion or just about 55% of GDP, compared to our neighbors mostly at higher than 100%.”

Actually, Salceda said, the government itself adds 3% to the savings, especially since interest payments have fallen from 29.7% of budget to only 17% creating so much fiscal space — which becomes productive expenditure or becomes idle savings that must turn to either firms or households to redeploy.

The country has so much idle savings — P3 trillion or P3,000 billion, which is enough to wipe out poverty, both cyclical and structural and vulnerable. From 2010 to 2014, the economy produced only 1.4 million incremental jobs although there has been a qualitative shift with the salaried group rising by 3.7 million, said Salceda.

Given this scenario, he added, the country needs policies that should, first, create a demand for the excessive supply of savings, short of exporting them abroad just as we are deploying overseas workers.

“Thus, we need an entrepreneurial revolution to employ this oversupply of savings for wealth creation and job creation. This should include a broad stroke of assistance via business incubation and angel financing,” he stressed.

Such revolution, Salceda said, requires a policy mix for investment promotion for domestic business formation through deepening of red tape reduction, improving costs of doing business particularly infrastructure, decongesting the overcrowded NCR-Clark-Calabarzon axis so countryside markets could be grown.

He added that the education system should be rehashed, because it currently feeds the culture or ethos of “a nation of employees” vs. Hong Kong as a “nation of shopkeepers,” which should be radically infused with a pedagogy that encourages entrepreneurship.”

“Just ask any kindergarten pupil what they want to be when they grow up, and they would say ‘maging teacher, maging doctor, maging engineer, maging sundalo (to become teachers, doctors, engineers, soldiers), all of whom are employees,” he emphasized.

Citing the recent Philippines’ investments and savings chart, Salceda said the country does not need money from foreign investors; “we need them for brand franchise, access to export markets, technology and patents.”

Firms are the biggest generators of savings but are bound to reinvest these on capital expenditures and business expansions abroad, he added.

The national government (also a deficit reducer), LGUs and government corporations are net generators which add more to savings. They therefore, should spend more on infrastructure under Public-Private Partnerships arrangements or borrow more for direct expenditure on projects with modest economic internal rates of return since they are productive investments, he said. (PNA) SCS/JCN/EBP