• Growth, technological progress and propagation: The formula for development



    For the last few years, the Philippine economy has shown an incredible performance in terms of growth, exceeding 6 percent for the ninth consecutive quarter and averaging a 6.9-percent increase from a year earlier, as per the last GDP report by the Philippine Statistics Authority from November. It is clear that the country, as well as its Southeast Asian peers, is among the decade’s rising stars given predictions of growth from the World Bank that expects it to expand even more in the coming years.

    That is why a natural question might come to mind: How is the Philippines still considered an “underdeveloped’ or “less developed” country?

    Underdevelopment is a difficult phenomenon to define since it is not “an interval in a development continuum along which all countries can be placed” (Sagasti, 1973) and is rather just the other side of the coin when talking about the “developed world”. In fact, underdevelopment and development emerged simultaneously and have been interacting in synchrony as two parts of a system as it is somehow presented in the Dependency Theory: An explanation to the increase in wealth of the more advanced nations at the expense of the poorer countries, as a consequence of the division of labor and resources between the “core” and the “peripheral” regions.

    Trying to approximate it, the concept behind “underdeveloped country” mainly revolves around the inability to provide acceptable standards of living to the majority of the population, combined with disarticulation (Sagasti) from a cultural and social point of view and domination at the national level as a result of colonization.

    With respect to the first factor, the Philippines still ranks 116th out of the 188 countries in the Human Development Report produced by the United Nations, given a percentage of people living below the income poverty line (PPP $1.90 a day) of as high as 21.6 percent, according to the Asian Development Bank, and a significant portion of the employed population (32 percent) still living on less than PPP $3.10.

    Regarding disarticulation, the country is a multicultural mix of different ethnicities resulting from colonization and directly affected by the geographical conformation of its territory, an archipelago consisting of 7100 islands and islets that makes consolidation a challenge in most cases. In fact, more than 175 ethnolinguistic nations inhabit the Philippines and despite the relevant presence of Catholicism, several other Christian and Muslims denominations are present.

    To answer the initial question, then, it is useful to look at development as a process of change where economic growth is only one of the factors that form the equation. GDP growth is not sufficient for the development of a country if technological progress and the propagation of its effects do not take part in the process of making the fruits of growth available for everyone.

    Technological progress refers to the ability that the Philippines needs to develop of creating, distributing and using technical knowledge in all of its processes, from production to the less tangible like cultural and sociopolitical ones. Uncontrolled efforts might lead to increased technological dependency, though, if the right infrastructure and barriers are not in place.

    That is why the execution of an appropriately designed plan of reforms is required at the national level with a focus, in the shorter term, on the main challenges the country is facing.

    In the first place, corruption needs to be eradicated. There is no silver bullet against it but freeing funds and facilitating operations is critical. This can be done through making law enforcement effective and through reforms of public finances management, which are just some of the first steps to be taken initially. These, combined with an increase in transparency and better access to information for all of the population, will empower citizens and build mutual trust between them and the government.

    Furthermore, the lack of knowledge and education narrows people’s way of thinking. Filipinos are an extremely entrepreneurial population yet they are not given the opportunity to gain sufficient education, which will allow them to be on par with international standards, due to low quality of teaching and missing infrastructure. A World Bank study from 2014 shows that teachers in the Philippines could only answer less than half of the questions on subject matter tests along with the fact that the country spends 30-50 percent less in infrastructure, health and education than its Southeast Asian peers. That is why efforts should also focus on making sure everyone achieves better education levels, especially in technical fields, to support the previously mentioned technological progress.

    As the Philippines continues growing, a plan to make real development the new North Star is required and once all the factors of the equation are adequately strengthened, the country will be in the right position to finally prosper.

    Francesco Paltrinieri is a graduate of Bocconi University in Milan, Italy. He is currently working as a growth analyst in First Circle, a fintech startup on a mission to improve business opportunities in the Philippines. To discuss how First Circle can help businesses with financing, visit www.firstcircle.ph or contact Francesco at francesco.paltrinieri@firstcircle.com


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