The devil is in the details

The new Philippine Development Plan focuses on inclusive growth as the be-all and end-all of P-Noy’s administration. The plan defines inclusive growth as high growth that is sustained, massively creates jobs and reduces poverty.

Looking back, we do find that Philippine per capita income growth had been very dismal when compared with our seven close neighbors in the second half of the last century. It only averaged annually at 3.3 percent in the ‘50s, 1.8 percent in the ‘60s, 3.1 percent in the ‘70s, -0.6 percent in the ‘80s and 0.9 percent in the ‘90s. Our close neighbors include Singapore, Hong Kong, Taipei and Korea, four of Asia’s only newly industrializing economies (NIEs) that are now considered part of the first world. The others are Malaysia, Thailand and Indonesia, which closely follow the path of the first four. There was no decade in the second half of the last century that our per capita income growth exceeded that of our seven neighbors. Unlike the Philippines, none of them also experienced any decade in which their per capita income growth was negative.

Sustained low per capita income growth consequently means more poverty for our people. As of 2009, this remained at 33 percent or a third of our population when measured using our old method of determining poverty. It was 26 percent when using the new method. Unlike the new method, the old used by the government to measure the food threshold and poverty threshold was higher by about 8 percent and 13 percent, respectively. Using the new method, subsistence and poverty incidence are now lower by about 2 and 5 percentage points, respectively.

Despite the use of the new method, however, we still find that poverty incidence in the country is still much higher than in our four neighboring NIEs and their three copycats. Even Vietnam, which came late in joining the free enterprise party when it ditched its command system of the economy in the nineties, had lower poverty incidence of only 14.5 percent. This is 12 percentage points lower that our 26.5 percent. Our only consolation is that our other partners in the expanded Asean—Lao PDR, Myanmar and Cambodia—still had 30 percent or more of their people wallowing in poverty.

Job creation had also been slow in the past and this explains why many of our people would go abroad when given the opportunity. As of April this year, our estimated population of working age or 15 years old and over already reached 61.8 million. Out of this, 64.2 percent were in the labor force. Of the total labor force, 92 percent were reported employed, leaving the rest, 7.2 percent, unemployed. This was down from 8 percent in the previous year. P-Noy mentioned this in his last Sona where he also reported that in his first year 1.4 jobs were added to the total number of employed workers. Correct, except that of the 1.4 million, about two-thirds or 800,000 were actually underemployed.

To achieve inclusive growth, P-Noy must raise our annual GDP growth, which by his own reckoning must be around 7 to 8 percent annually at least, basing on the experience of our more successful neighbors. Does P-Noy have a formula to do this? Yes, if we look at the new Philippine Development Plan.

The plan says that inclusive growth was elusive in the past for the following reasons. One was our poor and falling investment record. Second was our weak institution and governance failure. Third was our poor or low human development. Finally, there was deterioration in the state of the environment and natural resources, which was felt most by the poor who depend on them for their livelihood.

With this in mind, the new plan says that inclusive growth will be achieved through massive investment in physical infrastructure, the lack of which was also seen to discourage many people to invest in productive projects. In the plan, infrastructure investment must also come with a transparent and responsive government, human development and direct efforts at creating more jobs. However, saying these things is not enough. Where are the details? Any action?

First, P-Noy thought of the Private-Public Partnership to help build or rebuild our infrastructure. We still have to see more details and actions on this, however. If anything concrete has to be achieved before P-Noy’s term ends, it should now go beyond planning stage.

For human development, there finally is a serious effort seen in the Conditional Cash Transfer Program. More than two million poor families are now targeted with the increased budget given by P-Noy to the program. However, do not expect this program to create a dramatic change in the way our poor people live in a year or two. For what the program does is not merely to give money to the poor to help provide for their needs but to change their outlook in life. In Brazil where the program originated, this sums up into a “culture of poverty.” Being born poor, raised poor, you might think that there is nothing much you can do to improve your live. It is the conditions set under the program that will bring about, hopefully, the desired change in the way the poor look at life.

No, the target for change is not really the parents in a poor household but their children that will now be exposed to better education and health under the program. In time, when they finally join the labor force, the children, who would be benefited by the program, will now have more chances, not only to cope with, but also to rise out of their poverty. That is the politician will keep off their hands from the program.