WB suggests ways to make poor feel economic growth

MANILA, Philippines—The World Bank has cited the failure of the Philippines to translate growth of its economy over the years into poverty reduction, saying this is a key hurdle to improving the country’s competitiveness.

Although the Philippines has managed to grow over the years, even at the height of the global economic turmoil in 2009, the World Bank said in its latest study that the benefits of an expanding economy has been meaningless for a third of the country’s population who remained poor.

In the study, titled “Philippines: Fostering More Inclusive Growth,” the World Bank said some of the factors that prevented economic benefits from trickling down to the poor were insufficient investments in social services, unequal patterns of development in regions of the country, unequal access to public services, among others.

The World Bank also said that business sectors that contributed most to the overall growth of the Philippine economy did not provide substantial employment opportunities. The relatively high number of unemployed has made it difficult for the country to reduce poverty, it added.

“The main problem has been that the sector that employs the bulk of low-skilled workers [agriculture] has been growing more slowly than other sectors, while the sectors that have been contributing most to the acceleration of GDP [gross domestic product] growth after 2000 [mainly manufacturing] have been very capital-intensive and have not generated many new low-skill jobs,” the bank said in the study.

The foreign lender has challenged policymakers to implement measures that will address inequality and will make economic growth felt by the masses.

The World Bank has suggested two strategies to make the poor feel the benefits of a rising economy. The first is to increase income-generating opportunities for the poor. This may be done by an aggressive effort to attract more businesses, which will open more jobs for the poor.

The foreign lender said enticing more investors would require improving the investment climate and spending more on infrastructure.

The other strategy is to improve human capital. Training Filipinos to meet the labor requirements of investors would help reduce unemployment and, therefore, poverty.

“Judiciously increasing spending in these sectors [education, health, social services], better targeting the programs that would benefit the poor, and improving expenditure management will play an important role in allowing the poor to benefit from growth and to participate in it in the future,” said Jehan Arulpragasm, World Bank coordinator for human development and co-leader of the study.

Government estimates said growth of the Philippines averaged within the 4 to 5-percent range over the last decade. At the height of the global turmoil in 2009, when most industrialized nations fell into recession, the Philippines posted a modest 1.1-percent growth.

Despite a sustained growth, however, poverty incidence in the country remains at about a third of the country’s population, the same as the 1990s level.

Latest unemployment rate stood at 8 percent in April this year, up from 7.5 percent in the same period a year ago.

The Aquino administration has acknowledged poverty as one of the biggest problems, if not the most serious, gripping the Philippines. It has committed to implement measures to reduce poverty, and has vowed to accelerate growth of the economy to beyond the 7-percent level.

Economists said economic growth has to be robust, or at least 7 percent, to allow benefits to trickle down to the poor. –Michelle Remo, Philippine Daily Inquirer