Philippines’ puzzle: Growing economy fails to create jobs

The construction business that 47-year-old Alejandro Anareta Jr runs has seen brisk business in recent years, going from eight to 12 people when he first started to about 80 workers now.

“Seeing the country grow right before my very eyes, I know that the past two years have really been tremendous in terms of economic growth,” he says. “I can safely say it is the Philippines’ time, everybody is making plans for growth.”

The family has been riding that wave of prosperity seen in the wider economy and that means they are part of the consumer class, spending their money in newly-erected glitzy shopping malls.

“Almost all the brands are here, you don’t have to leave the country any more to go shopping,” says his wife Shaila, adding that she is most excited about her favourite brand H&M arriving in Manila next year.

Household spending has contributed to a boom in the Philippines. In the first three months of the year the country grew at a pace of 7.8%, beating even China.

But not everyone is feeling the benefits of that prosperity.

The next day in the blistering midday heat 56-year-old seafarer Ruben Barriantos is lining up for a third day at a seafarer centre on a busy road in the city.

The place is like an open-air, all-day jobs fair with representatives from international cargo and leisure vessels holding up signs for the vacancies they have.

Ruben, who is a second officer with 20 years’ experience, has been out of a job for seven months.

“I’ve never been out of work for this long before,” he says. “The government doesn’t care about the seafarers.”

Ruben is not alone in looking for work. Unemployment in the Philippines hit a three-year high of 7.5% in the first three months of the year, the highest in the region.

So how is the economy growing so fast, when unemployment is so high?

‘Inclusive growth’

Rajat Nag, managing director general of the Asian Development Bank, says the Philippines is experiencing “jobless growth”.

“The growth in the Philippines has not created the kind of jobs you need – growth has to be inclusive, that means you have to create jobs,” he says.

He explains that most of the expansion has been in the services sector, mainly the outsourcing industry, but that accounts for just 1% of employment – that too in highly skilled positions.

“So it doesn’t really trickle down. It doesn’t permeate the large labour force that remains untapped.”

What would provide more people the opportunity to better their own situation is a thriving manufacturing industry, according to Mr Nag.

He says the Philippines must attract foreign companies to manufacture goods in the country, putting it in direct competition with many of its neighbours.

“First the country has to invest much more in infrastructure. One of the reasons that manufacturing hasn’t taken place is because investors want assured power supply, good access to ports, good transportation networks.

“Once those are in place, investment will follow.”

Investment grade

In the past the Philippines has lagged behind the rest of the fast-growing region mainly because of corrupt practices by politicians and a brain drain which means that much of the country’s middle-class is outside the Philippines.

But in the last few years there has been improvement as President Benigno Aquino’s government has tried to implement good governance.

They have also increased infrastructure spending in partnership with private companies, although Mr Nag says it is still lower than the rest of the region.

In an acknowledgement of the progress made, ratings agency Fitch Ratings upgraded the Philippines to investment grade in March, followed by Standard & Poor’s.

But that provides no reassurance to Ruben Barriantos who says he will go back to his family outside Manila in a few days if nothing works out for him.

Even though his country is finally being heralded as a rising star, his prospects seem anything but bright. –Saira Syed, Business reporter, BBC News, Manila, Philippines