Unfinished agenda

With the midterm elections behind us, it’s time to focus back on the work to be done—and there’s a great deal of it. Only hecklers and blinded critics would deny that much progress has been achieved in the last three years, particularly in governance and the economy. But as many constantly point out, we have yet to turn the good economic news into benefits that reach all Filipinos, and not just a minority at the top.

What exactly is the good news? There remain skeptics out there, but let me distill it to the essentials using my “PiTiK test” that focuses on presyo (prices), trabaho (jobs/employment) and kita (income/output): P-T-K. (For my curious readers: Yes, a newly reelected senator did seek my permission to use that trademark mnemonic for his successful campaign.)  And based on latest available data, my PiTiK test yields 2½ good news out of 3. In contrast, 2 of the 3 yardsticks were bad news a year ago, so things have indeed turned around for the better.

Price inflation is the slowest we’ve seen in a while, easing to 2.6 percent as of April. (Translation: The average market bundle you would have bought for P100 last year now costs P102.60, which is not much of an increase.)  Average inflation rate was higher at 3.2 percent in 2012, and 4.4 percent in 2011. What to me is even better news is that food price inflation in April was reported by the National Statistics Office to be even lower—at 1.9 percent. As food dominates the budgets of poor families, this tells me that inflation has hit the poor relatively less than it has affected everyone else.

On jobs or employment, the news is half good and half bad. The January 2013 Labor Force Survey showed a lower unemployment rate of 7.1 percent from last year’s 7.3 percent, and a net gain of 606,000 new jobs. That’s the good news. The bad news is that the underemployment rate—the percentage of those who have work but feel the need to work more to make ends meet—has jumped from 18.8 to 20.9 percent, indicating that the quality of available jobs leaves much to be desired.

As for kita, aggregate output/incomes as measured by gross domestic product (GDP) grew at 6.6 percent, the fastest in Southeast Asia. Growth also picked up across all three major sectors of agriculture, industry and services, although the improvement in agriculture was only slight (from 2.6 to 2.7 percent, versus the 1.9 to 6.5 percent speed-up in industry, and 5.9 to 7.4 percent acceleration in services). I have written in recent columns of how key growth indicators in 2010-2012 show a clear break from past sluggish trends, particularly in the preceding six-year period of 2004-2009. This has won us unprecedented investment-grade ratings from the major credit rating agencies.

But as noted earlier here, much work remains for President Aquino and his team. The challenge is two-fold. First, we must broaden the base and widen participation in and benefits from our economy’s newfound dynamism. Inclusive growth is now everybody’s mantra, but is much easier said than achieved, as it requires fundamental restructuring of the economy’s driving forces and basic foundations. Second, we must lock in the basis for the current economic momentum so that change in political leadership in 2016 need not derail it. Neither challenges will be easy to meet, but the latter could come from the former. To my mind, five key things must happen if we are to broaden the country’s economic base, disperse economic activity and spread economic gains across all sectors and geographic areas of the country:

One, we must get agriculture moving in a way that secures for small primary producers (farmers and fishers) a greater share of the final value of their product while improving their productivity, raising their incomes, and uplifting their wellbeing. An important step in this direction is providing them wide opportunities to participate in value adding, such as drying and processing (examples are freeze-drying of fruit, coffee roasting, muscovado or coco sugar production, and the like).

Two, we must seize new opportunities to reinvigorate the manufacturing sector and resume the quest for broad-based industrialization that passed us by in past decades as services assumed premature dominance. Some called it “leapfrogging” then; now we see it as “missing the boat.” Among other things, China’s waning edge due to escalating labor costs is now paving the way for us to get back on the industrialization track.

Three, we must promote, develop and empower small and medium enterprises (SMEs), not at the expense of large enterprise, but by fostering a synergistic, even symbiotic relationship between them. In so doing, we must fill the many gaps in the various value chains in our economy while ensuring that these value chains are inclusive and not captured by dominant players. Small producers must also be aided in clustering themselves to achieve greater scale economies.

Four, we must make the financial system truly inclusive by reforming the rules, structures and mechanisms that perpetuate the perverse reality where financing is costliest for the small and most financially deprived, and cheapest for the large and most financially endowed. Farm credit and SME financing simply must become much more accessible.

Five, we must foster a solidarity economy based on social enterprises that would get us away from prevalent economic concentration, yet move beyond simple competition toward stronger coordination and greater cooperation for the common good.

The agenda can be further fleshed out, but if we can effectively pursue all these, 2016 need not be as scary as many seem to see it to be.

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