The Aquino administration capped the Asian Development Bank’s annual meeting with the triumphalist declaration that the corruption-ridden regime of Gloria Macapagal-Arroyo’s presidency was over.
With the new administration ceaselessly claiming to be an impeccable paragon of honest governance virtues, President Aquino concluded the meeting with a pledge to international financial lenders that foreign investments would be used properly. “You will continue to see results. You will continue to see a Philippines that is finally living up to its potential,” he said, adding:
“We are prepared to follow through on our commitments, and you are by all means welcome to see if we are living up to our word, a Philippines that is finally living up to our word. Investors and Filipinos alike see what is happening: Here is a country determined to turn the corner by instituting genuine, wide-ranging reform, and acting on its belief that good governance is the bedrock of equitable progress.”
In an effort to attract foreign investment, of which the flow into the Philippines is relatively smaller than that going to other Southeast Asian developing countries, the President acknowledged the ADB’s official development assistance, amounting to at least $761.97 million, presumably during the past two years. “For this, you have the gratitude of our people, and a commitment from my administration. Gone are the days when the funds you funnel to our country will end up like water leaking through a broken pail,” he said.
With former President Macapagal-Arroyo in indefinite detention and facing charges of electoral sabotage, she is no longer in a position to damage the economy through corrupt practices, and the President can’t revive the sluggish economy and blame it on the excesses of the preceding administration. The responsibility of reviving economic growth and reducing poverty and social inequality lies squarely on the shoulders of the Aquino administration, not on the scapegoats of the past regime. The President has run out of beasts to flog after prosecuting them for alleged criminal offenses related to corruption. What should impress the ADB is how the Aquino administration would address the issues of economic expansion and spread out the benefits of growth to the poor and reduce inequalities, not in how many people it sends to jail for corrupt practices.
One of the studies the administration should consider seriously is the ADB paper titled “Taking the Right Road to Inclusive Growth, Industrial Upgrading and Diversification in the Philippines.” Copies of the study were distributed to the delegates at the annual ADB meeting.
In its executive summary, the paper discussed key policy issues that need to be addressed if the Philippines is to embark on sustainable and inclusive growth. It took the view that the main reason behind the Philippines’ lagging growth performance and development outcomes in the regional context lies in “a sluggish transformation of the economy—in particular, stagnant industrialization in the past decades.”
“The Philippine economy’s chronic problems of high unemployment, slow poverty reduction, and low investment are reflections of sluggish industrialization,” the paper said. “In the past decades, the Philippine economy has been led by services, and it has been further shifting toward services with the rapidly growing business process outsourcing (BPO). Nevertheless, sole development of the services sector is not sufficient to address the development challenges and lead to inclusive growth.”
According to the paper, the Philippines’ biggest need is to develop a stronger industrial base to enable the economy to “walk on two legs” of “industry and modern services, to create productive job opportunities for the growing working-age population.”
The economy has shown solid growth performance over the 2000s, the paper said. But the country has not yet succeeded in translating this inclusive growth into one that can benefit the entire population.
“Despite the opportunities created by the economic growth in the period, many people remain poor and unemployed, and investments in the country are still below the regional standard. Identifying and connecting that missing link between economic growth and poverty reduction is the Philippine economy’s enormous challenge,” the paper said.
“The Philippines was an early leader, with a relatively advanced manufacturing sector and well-developed human capital in the 1950s and 1960s. Despite these favorable initial conditions, the country failed to achieve the high growth that other countries in the region achieved over the last few decades. Over the last five decades, gross domestic product per capita dropped from being one of the top in the region to almost the bottom,” it said.
According to the paper, the Philippine economy, despite the recent favorable performance, shows several structural weaknesses that make it difficult to translate good performance into inclusive growth.
Despite the recent growth episode, the paper said, “The economy suffers from high unemployment (7.3 percent in 2010) and underemployment (18.7 percent in 2010).” Given the unemployment (7.4 percent) and underemployment (19.3 percent) in 2008 when the economy was hit by the global crisis, “it is clear that the economic growth could not lead to better labor market indicators.” Reflecting the limited job opportunities, “workers have been restricted to low-productivity jobs that do not pay enough to lift themselves and their families out of poverty.”
The official poverty data show that “the Philippines’ poverty incidence fell from 33.1 percent in 1991 to 24.9 percent in 2003, but rose markedly to 26.4 percent in 2006, and then stagnated at 26.5 percent in 2009.”