• Inclusive growth at last?



    Economist says indicators look good — or is he just celebrating too early?

    There’s some good news on the economy—from the observer who follows its ups and downs most closely. The Inquirer columnist Cielito Habito suggests the economy may—at long last—be entering a period of inclusive growth (The Daily Inquirer, August 8, 2017) .

    Habito—a professional economist who was director-general of the economic and development authority, NEDA, in 1992-98—reports the key indicators as looking good.

    Joblessness down
    Jobs are apparently growing in their quality as well as in their number. Industry’s share is rising over a wider base, in an economy once dominated by the export of services—most prominently the assembly of electronic components—that have only the weakest linkages with the home economy.

    Joblessness is down during the five years, 2013-17. From 6.5% in 2013, it was down to 6.0% in 2014; 5.6% in 2015; and 4.7% in 2016. The number of the unemployed—there were 2.6 million of them in 2013—was down to 2.04 million in 2016, some 560,000 jobs having been created in the interval.

    Habito notes this is the first time he has seen the jobless rate fall below 5% of the work force.

    Where’s growth from?
    Coincidentally, my wife and I have direct experience of the kind of upturn Habito reports. Both our granddaughters finished college this school year; and we awaited corporate responses to their job applications with some anxiety.

    But it turned out there was no need for grandparent jitters. In fact, both young women had the leisure to choose—from among the multiple acceptances they received—the best entry-level jobs in precisely the careers they had trained for.

    Not from remittances
    So where is growth coming from? Habito says not from the usual remittances for their home folk by our migrants and overseas contract workers, who now number ten million strong.

    Nor is growth coming from increasing demand for our overseas contract workers. The deployment rate of our OFWs has in fact been declining—from 5.9% in 2005 to 3.3% in 2010.

    Dutch disease
    Our policy resort to labor exporting since the first oil crisis in the 1970s has been a mixed blessing.

    The UP economist Emmanuel de Dios regards OFW remittances as a kind of “Dutch Disease”—on the model of the bonanza from exports of North Sea hydrocarbons that drove down the global competitiveness of the Netherlands in the 1960s.

    Instances of virtually entire barangay idling comfortably on OFW remittances have been reported in the world press. But call centers and BPO—business-process outsourcing—have also energized secondary cities and even rural lands opened up by new infrastructure.

    Meanwhile, the liberalization of air transport—though still limited—has attracted new players; and roll-on, roll-off services are creating maritime highways throughout the archipelago. Already travel time from Luzon to Mindanao has been cut by an average 12 hours.

    Poverty core issue
    So where do we go from here? I wish I could share unequivocally in Habito’s optimism; but it seems to me much too early to tell if growth will persist. And, in any case, we have yet to face up to our core national problem of mass poverty.

    For the core poor, even periods of economic upturn may only mean being left further behind—since they’re unable to take up the jobs that growth opens up.

    Agriculture basic weakness
    Agriculture still is our economy’s vulnerable core; and two-thirds of all our poor households are estimated to be in the agriculture sector—whose productivity remains hostage to the fickle seasons.

    So that while industry and services created

    752,000 jobs gross in 2015, the economy gained no more than 183,000 new jobs net—since 575,000 jobs were apparently also lost in agriculture during the same period.

    Put most simply, agriculture’s weakness lies in the poor quality of its managing bureaucracy and the exploitative nature of its producer-consumer-middleman relationships.

    Josef Yap, an economist who watches over agricultural policy for the government think-tank PIDS, says its National Food Authority is “the biggest single source of misused funds.”

    No economies of scale
    Currently, our farm-gate prices make up only an average 47% of wholesale prices—middlemen taking more that half of all the profits generated in the agricultural sector. The comparative ratio is 62% in India; 63% in Thailand; and 97% in China.

    Obviously agricultural reform must begin with efforts to gain economies of scale in production, processing and marketing. Habito himself sees our best hope for inclusive growth in our nurture of agriculture and agri-business. But this will need radical reform and leadership willing to undertake drastic measures.

    We will need to bring together the modern and the traditional sectors of our economy—initially by giving all our poor the foundation of good health and basic education they need to make the best use of their lives.


    Please follow our commenting guidelines.

    Comments are closed.