Core
Business World, 10 March 2015
The Philippines will definitely miss its Millennium Development Goal (MDG) of halving poverty incidence by 2015. This follows from the official announcement last Friday that more Filipinos plunged into poverty in the first half of 2014, this despite the above normal growth during the last three years.
By contrast, our ASEAN-6 neighbors — Indonesia, Malaysia, Singapore, Thailand and Vietnam — have met this lofty goal many years ago. This suggests that our Asian peers are doing things right while we continue to muddle through.
Philippine authorities pledged to halve poverty incidence this year — from 34.4% in 1991 to 17.2% in 2015. In 2012, the last year the Family Income and Expenditure Survey (FIES) was done, the poverty incidence was 25.2%. It was 26.6% in 2006 and 26.3% in 2009. Nothing much has changed: one in four Filipinos is poor.
The real poverty picture may be worse than what the official statistics suggest. In 2012, the poverty threshold was P18,935 per year, P1,578 per month, or P52.60 per day. That’s the height of absurdity! I challenge public officials to survive on P57.60 per day for even a week.
I think the Social Weather Stations (SWS) is more accurate when its survey results show that more than half of Filipinos perceive that they are poor, and not one in four as suggested by official poverty numbers.
Based on the Annual Poverty Indicators Survey (APIS) released on Friday, poverty incidence among Filipinos rose to 25.8% in the first half of 2014 from 24.6% in the first half of 2013. Although not exactly comparable with the triennial FIES survey, these numbers maybe seen as leading indicators for what the 2015 FIES will show.
Earlier, the Aquino III administration has conceded that this MDG goal will be missed. Accordingly, it has reset its poverty target to a range of 20-23% by 2015, a lower target than the 17.2% committed under the MDG.
But even this revised target is optimistic. Since the proportion of poor people has barely changed from 2006 to 2012, with rising population, the absolute number of poor Filipinos has been increasing rather than decreasing.
Considering the rise in poverty incidence as shown by the recently released APIS numbers, it is reasonable to assume that poverty incidence would be about 25.% in 2015 rather than the revised 20-23%. If so, then there would be roughly 25 million poor people in 2015, or 1.1 million than in 2012.
What happened to the hundreds of billion pesos of cash transfers distributed by the government? The cash transfer program of the government appears to be flawed. The total amount of cash grants dropped from P20.9 billion in 2013 to P14.4 billion in 2014 or by a whopping 31.2%. Yet, the total appropriations for the cash transfer program in 2014 was more than P50 billion.
Strong, sustained growth is a necessary condition for poverty reduction, but it is not a sufficient one. It matters where growth is coming from.
In recent Philippine history, the economy did well during election years — in 2004, 2007, 2010 and 2013. It grew by 7.2% in 2013, which might be the peak economic performance in Mr. Aquino’s six-year watch. In 2014, GDP slowed to 6.1%, a full percentage point lower than in previous year.
For the next two years, it is reasonable to assume that the economy might grow by 6% to 6.8%, or an average GDP growth (from 2011 to 2016) of 5.9% to 6.1%.
This is not a shabby performance. This is higher than the average GDP growth rate in the previous decade (2001-2010), which was 4.8%. That’s the good news. The bad news is that growth could have been faster had the government been more focused and effective in implementing what has been planned and budgeted.
This year, the government expects the economy to grow by 7% to 8%. That’s a bit ambitious.
This year and next, the economy will be faced with many challenges. Geopolitical conflicts endanger a significant segment of our overseas Filipino workers. Unemployment in Europe remains high. This means lower demand for overseas employment.
With elections just around the corner, potential investors might adopt a wait-and-see attitude. The entry into the country of new long-term investments may take a pause.
The sharp fall in oil prices is double-edged. On the one hand, it might free up resources for other goods and services, which might then increase consumer spending. On the other hand, it will significantly reduce tax collection, which could then limit government spending for public infrastructure. The Bureau of Customs estimates a revenue loss of P40 billion in 2015.
How the fiscal managers would behave matters. Less damage to economic growth will be done if they stick to the expenditure program and accept the higher deficit in the face of dwindling taxes. Greater damage will ensue if they reduce publics spending in response to falling revenues and rising deficit.
While growth is slightly higher than the previous decade, it continues to be non-inclusive. The poverty level is basically unchanged. One in four Filipinos is impoverished. More poor people are left behind in the development process.
Sadly, Philippine poverty statistics support the view that recent economic growth has not been inclusive. One reason is that the growth of the agriculture sector has been sluggish. Yet, more than half of the population depends for their livelihood on agriculture and about one-third of the work force are gainfully employed in the sector.
Agriculture contracted by 0.5% in 2010, and then grew 2.6% in 2011, 2.8% in 2012, 1.1% in 2013, and 1.9% in 2014. Blame the poor implementation of agrarian reform and the lack of commitment and competence by the administration to implement productivity-enhancing agriculture projects.
An effective government should prioritize agriculture. Imagine if the government is more focused on its job and is willing to allocate more resources to the agricultural sector.
The harsh truth is that the economy has grown despite the government’s lack of focus and its inefficiency and ineffectiveness. The positive implication for policy should not be lost: a more effective government could make growth faster and inclusive.
An effective government should invest more heavily in public infrastructure in order to make up for past neglect. An effective government should pay attention to the rebuilding of homes, farms, and infrastructure damaged by major calamities, and in setting up facilities that will minimize potential damages to victims of natural calamities.
This massive investment would require an enormous amount of money. But this should not be a problem since the cost of borrowing is at rock bottom. And think of the enormous benefits of this huge investment: it will create many jobs that will help cut unemployment, ease poverty, and reduce hunger. In the long run, it will also propel the economy on a higher growth orbit.
There are two areas where the government could make a lot of difference in the lives of ordinary Filipinos: agriculture and public infrastructure. Had government officials focused on increasing agricultural output and on investing in public infrastructure — large, medium, and small — the government could have created a lot of decent, steady jobs.
In the last four and a half years, the Aquino administration squandered the opportunity to improve the lives of the poor. There was too much emphasis on cash transfers and too little on job creation.
The administration officials misjudge the thinking of the average man on the street. They thought Filipinos prefer dole-outs to work. They were wrong. Having a job is better because it is not only good for one’s pocket but it’s also good for one’s soul.
