growth amidst bureaucracies: philippines and asian experience

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Growth Amidst Bureaucracies: Review of Philippines and Some Asian Economic Performance Bienvenido “Nonoy” Oplas Jr. Presentation at the Rotary Club of Manila Bay Astoria Plaza, Ortigas, Mandaluyong City 31 January 2012

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Analyzing sources of growth and the burden of government bureaucracies.

TRANSCRIPT

Growth Amidst Bureaucracies:

Review of Philippines and Some Asian

Economic Performance

Bienvenido “Nonoy” Oplas Jr.

Presentation at the Rotary Club of Manila Bay

Astoria Plaza, Ortigas, Mandaluyong City

31 January 2012

Outline

I. Economic Growth

II. Bureaucracies

III. Conclusions

Vs. 3rdQ 2012 other Asian GDP Growth Rates:

China 7.7%, Indonesia 6.2%,

Malaysia 5.2%, Vietnam 4.7%,

Thailand 3%, Singapore 0.3%.

I. GROWTHLast November 30, 2012, after the 3rd Quarter 2012 GDP data was

announced by NEDA, I wrote this article in www.interaksyon.com...

Today, NEDA and NSCB announced a 4th Qtr

2012 GDP growth of 6.8%, so that full year

2012 growth is 6.6%.

Other Asians so far, 4Q 2012:

China 7.8%, Vietnam 5.4%, Singapore 1.1%.

Forecasts 1: The EconomistSource: January 25th 2013 issue

A. Growth Leaders, 2012 and 2013:

1. China, 7.7 and 8.5

2. India, 5.4 and 6.5

3. Indonesia, 6.3 and 6.4

4. Philippines, 5.5 and 6.1

5. Malaysia, 5.2 and 4.5

6. Thailand, 5.8 and 4.2

7. Pakistan, 4.2 and 3.5

8. S. Korea, 2.2 and 3.3

9. Hong Kong, 1.7 and 2.9

10. Singapore, 1.2 and 2.9

B. Contraction:

1. Netherlands, -0.9 and -0.4

2. Italy, -2.2 and -0.9

3. Spain, -1.5 and -1.7

4. Portugal, -3.0 and -2.8

5. Greece, -6.8 and -5.0

Forecasts 2: Asian Devt. Bank

Source: ADB, Asian

Development Outlook,

Supplement December 2012

• On average, developing Asia

led by China and India will

maintain a fast growth of 6-7%

growth this year.

• US, EU and Japan will maintain

their anemic growth.

• EU balancing between

contraction and stagnation.

In case you wonder how GDP is computed…

GDP = C + I + G + (X-M) � Demand side

= GVA in Agriculture + Industry + Services � Supply side

C = personal/household consumption (in PH, about 70% of GDP)

I = investments/ gross dom. capital formation

G = government consumption

(X-M) = exports minus imports of goods and services

• Since C comprises

70% of GDP, even if I, G

and (X-M) do not grow

but if C grows by 10%,

GDP can grow by 7%.

• Table on the right

shows C as main driver

of PH GDP growth

Growth of World’s Largest Economies A:

Nominal GDP Size in $ Billion, 1992 vs. 2012

Source: IMF, World

Economic Outlook,

October 2012

Database

Over 20 years…

• PH economy grew

4.1x while those of:

• Vietnam 14x,

• Indonesia 6.5x,

• Malaysia and

Singapore 5.2x,

• Pakistan 3.9x,

• S. Korea and

Thailand 3.4x,

• Big jump in ranking of Russia due not only to growth

but also in high currency appreciation.

• PH is #12 in population size worldwide, but only #45

in economic size.

• Vietnam is growing fast but still far from PH

economic size.

• Purchasing power parity (PPP) is now introduced, to

equalize valuation of output…

World’s Largest Economies B:

PPP Valuation of GDP Size, in $ Billion, 1992 vs. 2012

Source: IMF,

World Economic

Outlook,

October 2012

Database

Over 20 years by

PPP…

• PH economy

grew 3.4x while

those of:

• Vietnam 6.1x

• Sing. 5x,

• Malaysia 4.4x,

• S. Korea 3.9x,

• Indonesia &

Taiwan 3.6x,

• Pakistan 3.3x,

• Thailand 3.2x

• Hong Kong

3.1x,

• Cambodia

6.3x, Laos 5.6x

(Million 1990 international $) Source: Maddison and OECD

Historical Share of Global GDP for Asia and ROWSource: Razeen Sally, “Asia in the World Economy”, EFN Asia Conf. HK, Nov. 7, 2012

Share of Global GDP per World Region

0

10

20

30

40

50

60

70

80

90

1820 1870 1913 1950 1973 1998 2001 2030

Asia

Rest of the World

• Industrial

Revolution in mid

1800s to 1980s (1+

century) was golden

age for Europe and N.

America.

•1980s globalization

and political

democratization in

Asia started fast

growth.

• Welfare populism &

high debt in Europe

and N. America

slowed them since

the 1990s.

Historical Share of Global GDP for parts of AsiaSource: Razeen Sally, “Asia in the World Economy”, EFN Asia Conf. HK, Nov. 7, 2012

Share of Global GDP per World Region

0

5

10

15

20

25

30

35

1820 1870 1913 1950 1973 1998 2001 2030

Other Asia

Japan

China

India

(Million 1990 international $) Source: Maddison and OECD

* In the next two

decades, not so

happy Japan –

ageing (and

declining)

population, high

public debt,

* Big population

Asia to grow more.

II. BureaucraciesFrom WB-IFC’s Doing Business 2013 Report

World Ranking in Ease of Doing Business (2012)

Ease of

Doing

Business

Starting

a

Business

Dealing with

Construction

Permits

Getting

Electricity

Registering

Property

Getting

Credit

Protecting

Investors

Paying

Taxes

Trading

Across

Borders

Enforcing

Contract

Resolving

Insolvency

Brunei 83 136 83 28 107 126 122 20 35 151 44

Singapore 1 4 3 5 14 8 2 4 1 12 2

Thailand 17 78 14 9 28 67 13 100 17 24 51

Indonesia 129 155 71 161 99 126 46 131 39 156 146

Malaysia 18 50 113 59 59 1 4 41 29 31 47

Philippines 136 158 102 54 117 126 133 136 51 112 163

Vietnam 98 103 67 135 47 24 166 151 68 30 142

Cambodia 138 171 149 130 110 98 79 54 120 142 149

Laos 165 89 80 138 72 166 182 123 168 110 183

Myanmar n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

China 91 151 179 115 40 67 97 122 60 16 75

India 132 166 181 98 97 40 46 147 109 182 128

Asia Economic Freedom, EFW 2012 ReportAsia Economic Freedom, EFW 2012 Report

0 2 4 6 8 10

Hong KongSingapore

New ZealandAustraliaMauritius

TaiwanS Korea

CambodiaAsia Avverage

PhilippinesMalaysiaMongolia

PNGThailand

Sri LankaVietnam

ChinaIndia

PakistanMyanmar

Source: The Fraser Institute.Source: The Fraser Institute.

III. CONCLUSIONS

1. Concentrate on sustaining high PH growth.

Before wealth can be distributed, it must be

created first. Forcible redistribution often harms

growth and entrepreneurship.

2. High unemployment and underemployment will

be slowly addressed if growth is sustained.

3. Asia will be the growth anchor of the world economy in

the coming years, especially its big population

emerging markets.

4. Big population is asset. 7 of the 10 largest economies

by PPP valuation have huge population of 100 M+ up

to 1.3 B. More population means more consumers,

more workers, more entrepreneurs.

5. “Tax is the lifeblood of the nation.” – BIR, DOF

�WRONG. Work and business is the lifeblood of the

nation. Tax is the lifeblood of government.

6. Business environment and tax rates in US, EU and Japan not good, many businesses and rich individuals there have jumped ship, or about to jump, mainly to E. Europe or Asia.

7. PH government bureaucracies, local and national, should reduce business permits, taxes and fees.

8. PH-based businesses, get ready for the good times. Prepare also for contingencies. Government is getting bigger and bigger, taxes will rise higher and higher.

9. Let’s go for a flat income tax, 15% both individuals and

corporations… in exchange for VAT hike from 12 to 15%.

Flat tax countries, in percent…

• 10%: Kyrgyzstan (2006), Kazakhstan (2007), Macedonia

(2007), Mongolia (2007), Albania (2008), Bulgaria

(2008), Serbia (2008)

• 12%: Georgia (2005), Macau, Belarus (2009)

• 13%: Russia

• 15%: Hong Kong (1947), Ukraine (2004), Iraq (2004)

Montenegro (2007), Mauritius (2007), Czech Rep. (2008)

• 16%: Romania; 18% Estonia; 19% Slovakia. Singapore?