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CRISIS creates opportunities and this time, the Philippines could be the beneficiary of such crisis-driven opportunities coming out of the recession in Japan and the United Kingdom, according to local economists. Nonetheless, they said, there are risks from this, especially to trade performance and the country’s remittance bonanza if a portion of the overseas Filipino workers market comes home.
De La Salle University economist Maria Ella Oplas told BusinessMirror that businesses could escape the gloomy economic environment in Japan and the United Kingdom by investing in countries like the Philippines.
Oplas said the government can help turn the tide in getting these investments into the country by being more proactive in enticing investors.
“Now is the time to put Build, Build, Build to a test. Is it really serving its purpose? Bilisan na ang [Let’s rush work on the] new airport in order to entice investors to come to the Philippines,” Oplas said. One reason for considering the Philippines is the level of wages in Japan and the United Kingdom. In a crisis year, this may be enough reason for businesses to consider operating elsewhere.
“We should anticipate investors going to the Philippines because the minimum wage rate in UK and Japan is very high,” Oplas said.
Public Private Partnership (PPP) Center Undersecretary and Executive Director Ma. Cynthia C. Hernandez also said these investors can choose to undertake PPPs in the Philippines where there is practically no demand risk.
Hernandez said all infrastructure projects enjoy high demand, noting how the Skyway now experiences traffic from high user rates, despite charging toll.
She added that the country’s airport only has a 30-million passenger capacity annually, but this is significantly lower than the demand. Hernandez also said an airport with a capacity of 60 million passengers may still be insufficient.
This, Hernandez said, is also the argument to support the PPP Center’s belief that having the Bulacan Airport, Ninoy Aquino International Airport, and Clark co-exist will help decongest airports in the greater capital region area.
“If you’re in recession in Japan, where will you invest? We’re taking advantage of that. Yeah, we have to take advantage of that. Because if, let’s say, their investment in Japan is facing some growth constraints, we always say, here in the Philippines, you barely have demand risk. Once you put up a project, there’s blockbuster demand, right?” Hernandez said.
Hernandez said the government is ready to facilitate these investments as the PPP Center already has a Memorandum of Understanding with the Japanese government through its Office for PPP Support.
She said this MOU intends to encourage Japanese firms to invest directly in PPP projects. This investment does not mean as consultants and contractors for projects, which is common in Official Development Assistance (ODA) projects.
“We also want the Japanese corporates, especially the smaller ones, to invest. Because actually, there are many small Japanese companies that are small in Japan. But if you ask them, how big is the project they can invest in, they’ll say, ¥2 billion. That’s like P1 billion—big for the Philippines, right? So, I think that’s a market that we can definitely tap,” she added.
Limited fallout
MEANWHILE, Asian Development Bank Economic Research and Development Impact Department Principal Economist John Beirne said while Japan and the UK dipped into technical recessions in the last quarter of 2023, the fallout for Asia is likely to be limited.
Still, Beirne thinks that Japan’s significant investment in the region and as a destination for exports should be monitored. A deeper recession could affect Asian countries such as the Philippines through financial and trade channels. “Overall, however, the magnitude of any negative impacts for Asia should be viewed in the context of resilient growth in the US, which is a more important export destination for Asia than Japan,” Beirne told BusinessMirror in an e-mail.
He noted that spillovers from the Japan and United Kingdom recessions may still be muted and that Asian countries would still prove resilient to this shock.
Efforts to diversify trade and cross-border investment networks will help Asian countries from succumbing to trade and financial crisis stemming from these economic fallouts in Japan and the United Kingdom.
But if the government does not take advantage of these opportunities, the crisis could significantly effect the economy through its trade performance and the fate of thousands of Overseas Filipino Workers (OFWs) in Japan and the United Kingdom.
Impact on PHL trade
ATENEO de Manila University economist Leonardo Lanzona Jr. told BusinessMirror that as one of the country’s top export markets, Japan’s recession could affect the country’s trade performance.
A recession in markets such as Japan and the United States can affect the country’s trade sector as they remain the country’s leading partners in exports and imports.
“A recession in both countries can affect our output only to a limited extent. The reason is that China, which is also facing a slowdown has become our dominant partner,” Lanzona, however, said.
Nonetheless, Oplas said thousands of OFWs may also be affected and some might be forced to come home. This means the country will receive less OFW remittances which usually help buoy domestic spending in the country.
Consumption spending accounts for about 70 percent of the Philippine economy. Remittances sent to OFW families are used to spend on education and basic needs of households, contributing to economic growth. Oplas said if this—OFWs returning—happens, the government should be ready to help OFWs with creating their own businesses as a means to reintegrate into Philippine society.
OFWs can start small through franchising which can help ease them into the rigors of running their own business. This will also help conserve their funds from their years working abroad.
Image credits: Michael Edwards | Dreamstime.com
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