Import substitution

Ike Señeres

IT is a sad thing to note that many people could not even tell the difference between poverty reduction and poverty alleviation. Simply put, poverty alleviation is just like giving a pain killer to a person who needs surgery, without doing a surgical operation. Putting it another way, poverty reduction means physically and permanently removing people from below the poverty line, while poverty alleviation means helping people so that the burdens of being poor could become more bearable for them. In connection with that, the leftist elements in our society already debunked the notion that the delivery of public services should be considered as part of poverty alleviation, arguing that the delivery of public services is a mandatory obligation of the government in the first place; meaning to say that it is not a special program.

It will be recalled that the Philippines as a country failed to meet the Millennium Development Goal (MDG) of reducing poverty by half by the year 2015, based on the benchmark data of the year 2000. Fast forward to today; the new Sustainable Development Goal (SDG) is to remove extreme poverty by the year 2030, in other words bringing it down to zero percent. In October last year, the National Economic Development Authority (Neda) reported that the poverty rate in the Philippines is 21.6 percent as of the year 2015. Based on the deadline of the SDGs, the Philippines as a country now has about 13 years to bring down the poverty rate to zero percent, based on the benchmark data of the year 2015.

As it is generally understood, the best way to physically remove people from below the poverty line is to help them so that they could get a job, or to help them so that they could start a business. Looking at that from the macroeconomic standpoint, what needs to be done is to create the conditions so that more jobs could be created, and more businesses could be started. In that regard, we have seen many examples of exporting local products and services have actually contributed to creating more jobs and starting more businesses. That being a proven and tested formula, we should continue doing that. As we have seen however, exports have not created as many jobs as needed, and have not started as many businesses either. What that means is that we need to try other formulas as well.

As it turned out, we need not look too far, because import substitution now appears to be the most practical formula that is really worth trying. Simply put, import substitution is reducing our importation of foreign products, and replacing these with locally grown or locally manufactured products. The range of products could range from food items to durable goods, but all we have to do really is to look around but not to look too far. For argument’s sake, we could accept the fact that the Philippines could not produce as many durable goods as much as we want to, but the situation is reversed in the case of food items, because we could actually produce these as much as we want, being an agricultural country and being also an archipelagic country as well.

Perhaps it could be said that the basic foundation of import substitution is no other than import prevention. I understand that I am introducing some new terms that may be unfamiliar to many people, but that is how it is, that is how it should be if we want to think outside of the box. The basic principle behind import prevention is for all of us to make a conscious effort to avoid importation as much as we could, by finding local sources for whatever items that we desire to import. Although it might sound similar, import substitution is actually different from import prevention, because the latter involves the production of goods that would equal or approximate the quality of imported goods, so that there would be no need to import these.

Based on my own estimates, the Philippines as a country is importing about 90 percent of our milk, our flour, our soybeans, our fishmeal and our meat and bone meal, the latter three being the basic ingredients of animal feeds. As we all know it, milk is the basic ingredient in the manufacture of cheeses and ice creams, and flour is the basic ingredient in the manufacture of breads and cakes. As the numbers will show, it will appear that most of the pork and chicken we eat are also imported, because the protein in the imported ingredients simply converts into meat. All told, it could be said that if only we could substitute all of those imports with local production, we would not only be saving on foreign exchange, we would also be creating livelihood and making our people rich.

E-mail: iseneres@yahoo.com