Strategies for inclusive economic growth
A few weeks ago, the Philippine Statistics Authority (PSA) reported that the economy expanded by 7.2 percent in the fourth quarter of 2022, with a 7.6 percent growth for the full-year 2022, thus breaching the government’s target of 6.5 percent to 7.5 percent. In December 2022, the unemployment rate was at 4.3 percent — the second lowest since April 2005. Meanwhile, the underemployment rate the same month declined to 12.6 percent from 14.4 percent in November 2022.
The numbers show encouraging signs of recovery from the COVID-19 crisis, despite global uncertainties such as the war between Russia and Ukraine. However, surveys that assess the sentiments of Filipinos differ. A survey conducted by Pulse Asia in November 2022 found that “controlling inflation” is the most urgent national concern (at 59 percent of respondents), followed by “increasing the pay of workers” (40 percent), “creating more jobs” (33 percent), and “reducing poverty” (28 percent). The Consumer Expectations Survey of the Bangko Sentral ng Pilipinas (BSP) for the fourth quarter of 2022 also revealed pessimism among consumers due to increasing prices of goods and higher household expenses, low income, and fewer available jobs.
In light of these developments, our think tank, Stratbase ADR Institute, recently organized its first business roundtable this year, bringing together top economic experts to share insights on how to build economic momentum through an investment-led growth. Dr. Ernesto Pernia, the former chief of the National Economic and Development Authority, emphasized the need to prioritize human, social, and physical infrastructure. He noted that investments in physical infrastructure can be costly, but are more feasible through public-private partnerships (PPPs). He emphasized that the conditions and guarantees imposed by the public sector on private sector partners must be “fair and sufficiently attractive for them to recover their investment cost and with reasonable returns.”
Jonathan Ravelas, the managing director of eManagement for Business and Marketing Services, expressed optimism given the Philippines’ advantages in strategic location and young population. He stressed that to benefit from these advantages, we must ensure food security, improve infrastructure, promote investments, and really reduce transport and logistics costs. For Dr. Alvin Ang, professor and chair of the Department of Economics at the Ateneo de Manila University, the inflow of investments relies on both the government and the private sector working together. He observed that there are not enough jobs in agriculture and that challenges in this sector must be addressed to prevent further rise in poverty and inequality. Former BSP deputy governor Diwa Guinigundo, meanwhile, underscored the need for strong and trusted leadership. “To ensure credibility is present, public commitments must be supported by equally strong institutions. There should be strong reliance on science and rules, competence and skill sets, independence, the integrity of those in government service, a strong monitoring system, and consultative engagement with both the private sector and civil society,” he elaborated.
Our recently published study titled, “Investments in Manufacturing: Managing Through a Position of Strength,” highlights the need to support and encourage both local and foreign investors to go into manufacturing to grab opportunities in the growing international and domestic market.
Indeed, the Philippines has sweet spots in its demographics, natural resources, geographic location, and language facility that must be harnessed to build momentum for long-term growth. But the prerequisite is to focus on good governance and adherence to the rule of law. Undoubtedly, investments serve as a crucial tool in increasing a nation’s productivity while generating jobs and employment, providing income security, and alleviating other economic challenges that continue to be experienced by millions of Filipinos today. However, they will not happen on their own. They have to be kick-started by private sector investors, who have the resources and the expertise to get the job done. But then again, these investors will move only when they find the environment conducive for them to do so. After all, a sustainable PPP is a two-way street.
Dindo Manhit is founder and CEO of the Stratbase Group.
