Breaking out, taking off and lifting all

Since Monday, top officials and leaders of government, business, civil society, academe and external donor agencies have been meeting in Davao City for the regular Philippines Development Forum (PDF). The PDF, according to its website, “is the primary mechanism of the government for facilitating substantive policy dialogue among stakeholders on the country’s development agenda.” With the choice of this year’s venue, government seeks to highlight Mindanao as a key focal point for national development. With the theme “President Aquino’s Social Contract: Moving Forward in Achieving Inclusive Growth and Good Governance,” the 2-day gathering will conclude today with a speech by President Aquino, who will be presented with the forum’s resolutions and a shared agenda for action crafted by the forum’s multistakeholder participants.

Some 25 years ago, when it was the mother of the current President at the helm, this meeting was commonly known as the annual “Pledging Session” of the various donor agencies extending official development assistance (ODA) to the country. Formally known then as the Consultative Group (CG) Meeting, it was keenly watched particularly for the amounts committed by the various donor agencies in soft loans or grants for projects they were to fund in the year(s) ahead. The headline news coming out of the CG meetings, which were always held abroad then (in Europe or Japan, i.e., in the donors’ own turf), was the bottom-line figure giving the total amount pledged by our donors, usually adding up to around $1.5 billion-$2 billion a year at the time.

Times have since changed.  What was then a donor-pledging session is now termed as a development dialogue. “Development partners” is now the favored term over “donors,” who remain focal participants in the gathering. No longer is the meeting held primarily to solicit foreign funding support for development projects that we don’t have enough funds for. With stronger government finances, our officials can assert that the need for external funding assistance is no longer as critical as it had been in the past. Hence, the forum’s wider objective is now to “develop consensus and generate commitments among different stakeholders toward critical actionable items of the Government’s reform agenda”—with ODA pledges being secondary.

This year, the government has gone a step further and dropped the customary prepared statements from foreign ambassadors and heads of multilateral development agencies from the program, giving way to more open and interactive discussion. The only prepared statements are presentations by senior government officials to showcase recent achievements and trigger discussion on imperatives for further action.

In this PDF, our economic managers have a proud story to tell. Recent developments suggest that we are breaking out of an extended period of inferior economic performance relative to our neighbors. Our 2012 gross domestic product (GDP) growth of 6.6 percent is second fastest within the entire Asian region, eclipsed only by China’s 7.5 percent. My own calculations from the data confirm that our economic performance in the last three years (2010-2012) represents a clear break from our average performance in the previous six years (2004-2009). Applying my usual “PiTiK” test (for presyo, trabaho and kita— prices, jobs and incomes), I find that recent annual inflation rate has averaged 3.8 percent, after averaging 5.8 percent in the previous six years. Net new jobs generated now average 856,000 per year, against 766,000 a year in the six years prior. Annual GDP growth averaged 5.9 percent in 2010-2012, from only 4.9 percent in 2004-2009.

I find it particularly heartening that growth in manufacturing and in fixed domestic investment has broken away from previous sluggishness and stagnation, and this to me signals a structural strengthening of our economy. From a lackluster average annual growth rate of 3 percent in 2004-2009, manufacturing output has surged at an average of 7.5 percent in the last three years. If this keeps up, we may yet resume the industrialization that we missed in the last two decades as China assumed the role of factory of the world—a role now compromised by rapidly rising wages. Meanwhile, domestic fixed investment (aka fixed capital formation) grew at an annual average rate of 9.3 percent in the last three years, a great departure from only 1.8 percent in the previous six. Investments in durable equipment in fact fell by an average of 1.8 percent annually in 2004-2009; in the last three years, it has surged with an average 12.1-percent growth. Similarly, private construction has jumped 12.4 percent annually, whereas it only managed to average 4.3 percent in the previous six years. Export growth, averaging 10 percent annually since 2010, is making a clear break from the previous six years when it only grew at 3.5 percent per year on average.

Where we have yet to break away from past trends is in our inability to translate economic growth into commensurate job generation, hence poverty reduction. The 3-year average job generation figure cited above conceals the fact that the impressive 7.2-percent third-quarter GDP growth actually came with the loss of nearly a million (882,000) jobs! This is the first time I’ve seen jobs actually decline in a particular quarter—at such large numbers at that. Seeing not only jobless growth but even job-killing growth in our midst, the PDF needs to come up with more creative approaches if we want an economic takeoff that also lifts the lives of all Filipinos.

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