The announcement appeared to be designed to pull the country out of a tailspin of politicking. In spite of an impressive set of headline numbers showing off better-than-expected economic growth in 2002, the public mood continued to be negative and somber, in large part due to a frustration with domestic political and social issues which were seen as causing a drag on the economy.

The President’s declaration was seen as a counter-trend to set the swing of the pendulum back towards economic reform and away from the political warm-ups to 2004. In her words, the declaration had freed her from a burden and set her free to pursue the tough reforms needed for the country to continue on a growth path.
In this special feature, Philippine Business attempts to piece together the various elements designed to breathe more life into the economy and the public mood in the final 18 months of the President’s administration.

From Macro to Micro
One clear indication that the Arroyo administration has shifted its economic management thrust from macroeconomic growth to “growth felt by the masses” was the controversial appointment late last year of corporate and financial planning expert Romulo Neri as the new NEDA Director-General, replacing hardcore economist Dante Canlas. People should feel in their daily dealings that the economy is indeed improving in the real world and not just in numbers. The government said there is a need to reconcile whatever is being reported in figures to what is being felt especially by the masses.

However, Secretary Neri’s Plan 747, which carries an aggressive 7% annual economic growth target for seven consecutive years, is seen as unrealistic. Inasmuch as achieving the Plan 747 goal requires massive resource mobilization, how the government intends to do this given the deficit problem is one looming concern.

Nevertheless, be it by way of Plan 747 or the Medium Term Philippine Development Plan, a route to growth and improvement of lives of Filipinos is for the economy to generate more jobs. With this in mind, the President’s first directive to Secretary Neri was reportedly to decongest billions of pesos in grants and concessional credits within the government bureaucracy. This will benefit especially the small and medium enterprises (SMEs) which, according to the Department of Trade and Industry (DTI), comprise 99.6% of total firms, accounting for about two-thirds of the labor force.

Developing the SME sector is a strategy that will not only alleviate the unemployment situation but the poverty scenario as well. Realizing this, a comprehensive and integrated approach to SME development tagged The National SME Development Plan was adopted by the Arroyo administration as a priority strategy for developing the sector. According to DTI, the SME Plan shall touch at least one out of four SMEs in the country by: promoting lending and guarantee by GFIs and conduits, firstly, by infusing P10 billion of new funds in six months and standardizing SME lending programs; increasing SMEs’ sales and customer base; providing and facilitating their participation in technical and managerial training programs; and upgrading their product offerings to higher standards.