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Recognize the problem so you can act

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The GDP numbers are out, and they’re good, and supported by the confidence I sense in business today. But, as Ben Diokno has said, is this growth rate sustainable, or just recovery back to normal from unusually slow growth the previous year? Will it be the flash-in-the-pan growth of 7.6 percent in 2010 that was due in major part to the nonexistent (1.1 percent) GDP growth in 2009, or is it more solidly based? The real 2010 growth was, if averaged as you should over the two years, around 4.4 percent. Similarly, 2011 and 2012 averaged out would give 5.3 percent. So is that the real growth rate, or is it indeed the 6 percent plus recorded?

Whichever it is, caution should be exercised about getting too euphoric. Euphoria tends to lead to complacency, when running scared is what the government should be doing because its essential, most important task—to give people, all people, a decent life—has seen no improvement in the last decade or so.

There are more Filipinos subjugated to poverty today than there were 10 years ago. The Arroyo administration saw those in poverty rise from 19.8 million (2003) to 23.1 million (2009), and that’s an almost certainly understated figure. It doesn’t matter how magnificent GDP growth was if more people are poor, if more people are jobless.

The President stated in Davos that the government must ensure all benefit from this GDP growth. So the focus must also be on how growth in income is equitably distributed (or the GINI factor) and not just GDP, important though that is, too. The key to success in poverty reduction in the major East Asian nations was their rapid economic growth—averaging 6 to 9 percent a year, and sustained over two to three decades, while the Philippines averaged only 3 to 4 percent. But this must be (that now much-bandied-about phrase) inclusive growth, which the President actually vowed to achieve. And that, in the Philippines is what it has not been.

A worrying aspect of the Philippines’ development in recent decades is not only the slow growth but also that inclusive growth hasn’t occurred. The slow pace of poverty reduction and the persistently high level of economic inequality have not been addressed. Among the major East Asian economies, the Philippines has had the slowest rate of poverty reduction in the last three decades and today has one of the highest incidence among its Asian neighbors.

It’s that way because there’s been insufficient focus on including the poor. Oh, much talk about it, but not the actions that would resolve it. The numbers confirm it.

The huge inequality that exists today—where 79 percent of the population belong to the low-income group, only 5 percent are in the high-income group, and the middle class is way too small (16 percent) —needs leveling. This can only be done through job creation; there is no other way. Yet the necessary high-level attention to achieving it isn’t there. I even wonder if the absolute importance of job creation over almost everything else is recognized.

If you make job creation your No. 1 priority, everything else you must do follows. You make sure everyone is well-educated and healthy (that covers two of the major programs of the government). You make sure the infrastructure, logistics and an efficient bureaucracy are in place so businessmen will invest (that’s two more), and so on. Also, with more decent-paying jobs here, Filipinos will no longer be forced to flee for a job. Brain drain is minimized, while Filipino workers get to spend quality time with their families. So focusing on job creation leads to all the rest.

The Conditional Cash Transfer program is a good interim solution, but it must be replaced by job creation, and rapidly. Particularly as the budget (now at P44 billion) means less money available to do the things necessary to grow the economy on a sustained basis, so that a job instead of a dole can be given. Admittedly, growth in recent years has brought some benefit to the poor.  But when compared to our neighbors, it has not been good enough.

What needs to be done I and many others have enumerated countless times. It doesn’t need repeating here. What I’d like to focus on today is how to get better attention to doing those things. And that’s to focus on the GINI factor and the employment statistics.

What is the GINI factor? It’s how much difference there is between the rich and the poor—the income inequality. It’s what “inclusive growth” is all about: Are the poor included in the economy’s growth?

It’s a number between 0 and 1. A score closer to zero indicates a more equal distribution. The Philippines’ GINI is 0.448, so it’s got a long way to go for the poor to be uplifted (pulling the rich down is a not-too-likely scenario). Our neighbors have better GINI figures: Thailand 0.425, Cambodia 0.407; Indonesia 0.394; Malaysia 0.379; Vietnam 0.378; and Laos 0.326.

This is one figure that we should be also closely monitoring, along with GDP and employment stats. But let’s get honest ones so the problem is fully recognized and consequently action is taken to improve it. It’s not this government’s fault that employment is so low, so dig out what it really is and announce it so action will happen. The leaders of this country should take a closer look at the two. The significance of these figures must be raised and publicized frequently so action to accelerate opportunities for enriching the poor—with a meaningful, satisfactory life—will occur.

The first thing necessary to fix a problem is to recognize it. The squeaky wheel gets oiled. Let the GINI factor and unemployment numbers squeak, so they can be oiled.


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Tags: arroyo administration , Ben Diokno , Conditional Cash Transfer program , GDP numbers , Gross Domestic Product



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