More reforms, more jobs

Creating more jobs, as we all know, remains the foremost challenge for our economy in the years ahead, even as brisk rates of economic growth have lately put the Philippines ahead of the pack in South East Asia, and even Asia as a whole. In last week’s Arangkada 2014 forum of the Joint Foreign Chambers of the Philippines (JFC), I heard the word “tiger” used several times to describe the Philippine economy as it is performing now. Well, it may indeed have begun to look that way, but for too many in Philippine society, it has yet to feel that way. And the reason for that is that job growth has lagged far behind the growth of the economy. Here’s the lowdown: the Philippine economy grew by 7.2 percent last year, but the number of jobs grew by barely one-fifth of 1 (0.2) percent.

For the third time, Arangkada 2014 made an annual assessment of progress on a long list of 471 recommendations the foreign chambers made in late 2010 for achieving accelerated and broad-based growth for the Philippine economy. With the theme “More reforms = More jobs,” this year’s assessment reported further improvement over those reported last year. The recommendations that moved ahead—that is, those identified as “started,” saw “substantial progress,” or deemed “completed”—comprised 71 percent of the total, better than last year’s 63 percent. Still, much remains to be desired. Only 4 percent of the 2010 recommendations have been completed, and only one out of five (20 percent) have seen substantial progress in implementation. Those marked as “started” comprised the largest group (46 percent). With last year’s corresponding percentages at 2, 16 and 44 percent respectively, the forward movement has been anything but spectacular. Meanwhile, more than one out of four recommendations either have remained seeing no action or saw backward movement or regression.

These recommendations fall under broad headings that address constraints to economic growth, overall competitiveness, specific economic sectors (including agribusiness, business process outsourcing or BPO, creative industries, tourism, infrastructure), general business environment, environment and natural disasters, governance, labor, security and social services. Most saw improved implementation in the past year, with the number and percentage of active recommendations (vs. “dormant recommendations”) having significantly gone up.

The best improvement was seen in the promotion of creative industries, where implementation rate rose from less than 50 percent to 88 percent. Major improvement was also seen in airports, where active recommendations rose from 50 percent to 87 percent. Recommendations on security also saw significant improvement, with active recommendations jumping from 73 to 93 percent. But there were areas where the number of nonmoving recommendations went up, including in environment, health and population, telecoms, macroeconomic policy, and tourism/medical travel/retirement.

If our impressive economic growth of the past year has not been widely felt, it is because too few economic sectors and geographic areas have driven and consequently benefited from that growth. Furthermore, weak linkages between the leading growth sectors and the rest of the domestic economy yielded growth lacking in depth, hence providing shallow benefits. And too little job-creation with the growth we attained, driven dominantly by capital-intensive (a.k.a. labor-saving) industries, yielded growth that has continued to fail in reducing poverty.

It was in this light that JFC focused on seven “big winner sectors” in its original Arangkada document in 2010, namely: agribusiness, infrastructure, tourism (including medical travel and retirement), BPO, creative industries, manufacturing, logistics and mining. The first three are singled out as top drivers of more inclusive growth. This is supported by my own analysis made in a 2010 ADB paper (“An Agenda for High and Inclusive Growth in the Philippines”), where I argue that for a sector to be an effective driver of inclusive growth, it must satisfy at least two attributes. First, it should be strongly job creating, meaning, it uses more labor per unit of output. Second, it must have strong linkages with other domestic industries—either as buyer of their products as inputs to production (backward linkages), or as sellers to those industries that use its product as input to their production (forward linkages).

Arangkada 2014 stressed that creation of more jobs so that employment growth would not lag so far behind economic growth will require embarking on crucial reforms yet to be acted upon by government, among the 471 actions listed in 2010. National Competitiveness Council co-chair Bill Luz pointed out that improving ease of doing business in the country still has a long way to go in spite of impressive gains made in the past year, when the country jumped 30 notches in the global rankings. Former Finance Secretary Bobby de Ocampo pushed, among other things, for proactive preparations to join new emerging trade agreements, particularly the Trans Pacific Partnership, especially in light of our hosting the Asia-Pacific Economic Cooperation meeting anew in 2015 (the last time was when we were working together in the Ramos Cabinet in 1996). Philippine Economic Zone Authority director general Lilia de Lima, Arangkada 2014 honoree and keynote speaker, has demonstrated through 19 years of outstanding leadership of her agency that hard and honest good work is what’s needed from our government officials if we are to reap positive results for the country.

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