Government prodded on poverty, labor issues

DAVAO CITY—The Philippines should increase its domestic productivity to more effectively address the labor-generation and poverty-reduction problems, or risk being be pulled down by criticism that its recent high gross domestic product (GDP) percentage was not benefiting its population, the Asian Development Bank (ADB) said.

Neeraj Jain, ADB country director in the Philippines, told the 8th general membership meeting of the Davao 21City Chamber of Commerce and Industry Inc. (DCCCII), that the Philippine economy was already in similar a league with Indonesia as “the most improved economies” in Asia after China, with their steady climb in GDP amid the slumping US and European economies.

He said that it would be easier for the Philippines to reach 7-percent growth by 2016 if the government would address the obvious weakness in the economy: low investment and government spending.

In a chart that he showed during the DCCCII meeting at the Marco Polo Hotel here, the Philippines spent the lowest in both the fixed-capital expenditures and government expenditures, compared with the other better-performing Asian economies of Thailand, Malaysia, Vietnam and Indonesia.

In government expenditures, for instance, the Philippines was spending a relatively flat, and even gradually declining trend of 17 percent, and gradually going down to 15 percent of GDP in the last three years, compared to increasing government spending of 20 percent for Thailand, 26 percent for Malaysia and 30 percent for Vietnam.

“Your public-sector spending is the lowest in Asia, and government spending in infrastructure is only between 2 percent and 3 percent of GDP,” he said.

Addressing, at least, these two major issues would stoke further growth in domestic production, with positive forecast banking on robust consumption, increasing public spending and a strong business sentiment, he said.

“You could easily hit 7 percent by 2016,” he said.

Talking to the BusinessMirror after his presentation, Jain said the government should continue to address the poverty issue, which could be largely improved “by ensuring that more and more people are absorbed in the jobs generated.”

“If we could hit the 7-percent GDP growth and more people are employed, then we can expect more people to participate in the economy, and to benefit from the gains in the economy,” he said. He agreed with observations that the high GDP performance this year was not felt by many Filipinos.

The country grew by 6.4 percent in the first quarter, a level second only to China, and by 4.8 percent in the second quarter, an average of 5.6 percent. This first-semester average was higher than the average of the entire decade of 2000 of 4.8 percent growth, Jain said.

He said the Philippines was growing while many national economies were struggling in the face of the difficulties in the US and the debt crisis in Europe.

The economy grew well in the 1960s, with 4.9 percent, in the 1970s with 5.9 percent, but plunged to 1.7 percent in the 1980s. But the following year, the economy bounced back to 2.9 average, although this was pulled down by the Asian financial crisis, and almost doubled to 4.8 percent in the 2000s.

Norio Usui, ADB senior country economist, also said the Philippines should not be heavily relying on the outsourcing sector as “the savior the economy.”

“Remember that the BPO [business-process outsourcing] sector, while it has already attracted more companies to your country and more are still relocating here, only hire only 1.2 percent of your labor force. This is very little when we talk of having an inclusive growth,” he said.

Both Usui and Jain batted for more labor-intensive operations, especially among foreign direct investments. “The BPO is, indeed, a good sector, but to talk of it as the only one now to save the economy is wrong,” Usui said.

“The government needs to focus on the semi-skilled and the unskilled workers where many of your workers are found. They need to benefit and to participate in the economy,” Jain said.

“Just by addressing your weak labor indicators could make a deep impact in addressing poverty,” he said. –MANUEL T. CAYON / CHIEF, BM MINDANAO BUREAU, BUsinessmirror