Development beyond Manila

By the looks of it, the Philippine economy has been getting more Manila- and Luzon-centric in the last 20 years. While I’ve noted that our economy’s growth is getting more inclusive (“Inclusive growth is finally happening,” 8/8/17), it’s in the geographic dimension of inclusiveness where we don’t seem to be making progress. In fact, we seem to have moved in the wrong direction.

The numbers say it all. Luzon accounted for 73 percent of our total gross domestic product (GDP) in 2016, even more dominant than its share 10 years prior (2006) when it was just 66 percent. Metro Manila and surrounding provinces in Central Luzon and Calabarzon had a 63-percent GDP share in 2016, up from 56 percent in 2006 and 53 percent in 1996. Metro Manila alone (aka the National Capital Region or NCR) accounted for nearly 37 percent of GDP in 2016, from about 33 percent in 2006 and an even smaller 30 percent in 1996. By this measure, “imperial Luzon” and “imperial Manila” (as southerners often say it) has become even more “imperial” over the last two decades. They are now looking to the President from Mindanao to change that.

Residents of Metro Manila, who comprise only 12.4 percent of the country’s population, may know and care little about what happens in the regional economies outside of the city. But it doesn’t take much to understand that what happens beyond Metro Manila could have significant impact on their own wellbeing. For one thing, lack of opportunities in other parts of the country leads to more congestion and job competition in NCR as people flock to the city in the hope of finding jobs and livelihoods there. Not surprisingly, unemployment in NCR consistently well exceeds the national average, and is usually highest among the regions. Last October, it stood at 6.1 percent against the national average of 5.0 percent, surpassed only by the Ilocos Region’s jobless rate of 8.2 percent.

Even so, poverty incidence in NCR is the lowest at 3.9 percent, against the national average of 21.6 percent, and only about a tenth of the 37.1-percent average for Mindanao (where the Autonomous Region in Muslim Mindanao is worst, at 53.7 percent). Average income or GDP per capita in Metro Manila as of 2016 (P431,783 in current prices) is around five times that in Mindanao and the Visayas (P82,479 and P90,618, respectively), and three times the national average of P140,259. The Luzon average of P138,054 is almost equal to the national average.

Calabarzon is the next largest contributor to national output, being a far second with a share of 16.8 percent, followed by Central Luzon (9.5 percent) and Central Visayas (6.5 percent). The rest of the regions have shares of 4 percent or less, with ARMM accounting for a mere 0.6 percent. Calabarzon is also second in terms of average income, though again a far second, with its per capita GDP of P148,917 being only about a third of NCR’s. The Cordillera Administrative Region (CAR) is third with P133,654, while other regions with average income over P100,000, in order or magnitude, are Central Visayas, Davao Region, Northern Mindanao, and Central Luzon. The case of CAR, while surprising at first blush, affirms that manufacturing, prominent in Baguio City, is the most potent driver of jobs and incomes in any regional economy. It is the common thread in all the regions with higher economic shares and average incomes.

The lesson that emerges from all this is apparent: Manufacturing, which has been growing faster than the overall economy since 2010, deserves an even greater boost. And it’s not just about big factories. Much of it can and should take the form of greater value adding on farm products by more small enterprises all across the country. I’ve long argued that this would help raise farmgate prices received by our farmers with more competition to buy their products, rather than have a single large processor dictate monopsony prices that squeeze our farmers, as is still common in our countryside.

If our economy is to be less Manila- and Luzon-centric, we ought to pursue even more strongly this goal of having more geographically inclusive small-scale manufacturing.

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