RP must close gap between urban, rural

We Filipinos have always believed our country’s so fertile that if you stuck a stick anywhere in its soil it would grow. This is why the most recent Social Weather Stations (SWS) report that involuntary hunger in our country is reaching record levels gives you quite a jolt.

Yet that is just what Mahar Mangahas’s bright survey group found in its early December sounding of the national condition: “Almost one in four Filipino households reported itself going hungry in the past three months.”

Some 4.4 million households—24 percent of the total—said that “they experienced hunger at least once in the past three months.” Of this number, 4.7 percent said they were hungry “often” or “always” during the quarter.

Through the distance of decades, I recall the scientist Dr. Rodolfo Florentino of the Food and Nutrition Research Institute, who in the late 1970s—when “Operation Timbang” revealed malnutrition to be both severe and widespread among young Filipino children—would wryly say, “There is enough food to go around—but only if it’s distributed equally.”

Poverty still largely rural

The reality of growing hunger is shocking all the more because most of the Filipino poor still are rural people.

Arsenio Balisacan, the University of the Philippines economist whose field is poverty studies, notes that “despite rapid urbanization in recent years, poverty in the Philippines is still a largely rural phenomenon. Nearly two thirds of our poor live in rural areas, with the large majority of them dependent on agriculture for employment and income.”

Unlike neighbor-economies, whose growth has been both higher and sustained longer, our economy still hasn’t expanded enough to bridge the gap between its urban and rural sectors.

Our economy still has many characteristics of the colonial “dual economy.” This is an economy in which modern industries, mines or plantation agriculture exist side-by-side with backward sectors, with little interaction between them.

Our urban and rural sectors have few linkages and there is minimal technology transfer from the advanced to the backward sector. One telling detail is that only one out of three Philippine enterprises makes use of the banking system.

No trickle down

Our policy failure was to carry on with capital-intensive import-substituting industrialization long after our neighbors had switched to labor-intensive exports.

By so doing, we cut off the mutually beneficial linkages between agriculture and industry, constricted job opportunities and concentrated the benefits of development on the landowning, industrial and professional elite.

Until now, our economy’s fastest-growing components—labor export and its domestic counterpart, business-process outsourcing (BPO)—are enclave industries.

Similarly, our biggest exports, of electronic components and finished garments, have negligible effects on the home economy.
We import the raw materials, then reexport the assembled components. Agricultural exports account for less than 5 percent of our foreign earnings.

Highly unequal society

One reason income inequality among us is so high is that growth is so narrowly based. Metro Manila and its two satellite regions, Central Luzon and Southern Tagalog, produce 65 percent of domestic output and income. And while the center of modernization may be bringing “spread effects” to neighboring regions, those regions more distant actually experience “backwash,” as the modern economy sucks away both their capital and their most enterprising inhabitants.

In 2006, the richest 10 percent of Filipinos enjoyed roughly 23 times more income than the poorest 10 percent. Since the recession is raising poverty levels worldwide, our income gap may have risen even more since then. In South Korea, by comparison, the income gap between the highest and the lowest 10th is roughly eight to one.

Stepchild of development

We’ve been treating agriculture as the stepchild of development—though in the rest of East Asia agrarian reform became the foundation of industrial development. Yet manufacturing—on which our would-be modernizers placed their hopes of jobs and development—is in long-term decline. Even in the electronics and semiconductor devices sector, we should move up to higher-value manufacturing.

Right now, our biggest problem is how to employ 2.8 million undereducated and largely rural young people unable to fill the jobs the modern economy generates. (Call centers hire no more than 3 percent to 5 percent of all the applicants they interview.)

Turned in on itself in a kind of “shared poverty,” farming still employs over a third of all our workers—though it contributes less than a 10th of yearly growth.

The modernization we strive for should include industrializing our agricultural systems and processes. Not only must agriculture feed successive Filipino generations. It must also exploit export markets in rising industrial economies opening up through globalization.

There are newly rich consumers for high-value agricultural products in fast-developing powers such as China, South Korea and India.

Narrowing gap

The two halves of our dual economy, we must bring together by developing industries that use our agricultural raw materials. We should stop competing on lower costs or higher productivity. Instead, we must turn to high-value crops and fisheries. Our scientists in these fields are apparently among the best in the world.

South Korea reached its economic eminence by its dynamic concept of comparative advantage. We should seek our own global niche: low-cost manufacturing isn’t where we’re competitive. But before we can do that, we must give our poor the human capital—the foundation of good health and basic education—they need to make the best use of their lives. –JUAN T. GATBONTON Editorial Consultant, Manila Times