Numbers don’t lie. When the World Bank published its Global Economic Prospects report in June, it put the 2017 growth outlook for the Philippines at just under 7%. That is nearly twice the country’s long-term growth rate since the 1980s. It is also higher than the average growth rate over the last six years, which has been just north of 6%.
This optimistic outlook is driven by an expected increase in the Philippine government’s infrastructure investments and is also unfazed by a managed current account deficit and weakened peso. For the most part, this remains believable given what is still a very healthy macroeconomic environment ― for now.
But while talk of robust economic growth continues to be a popular topic at business clubs and executive boardrooms, most ordinary Filipinos have yet to experience a greater share of this prosperity.
Although there has been a marked decline in poverty incidence, one-fifth of Filipinos remain “poor.” Many more are considered “near-poor”; that is, they slip in and out of poverty when hit by external shocks such as job loss, natural calamities, community conflicts, and sundry family crises.
And while unemployment (5.7% in April) continues to post new historic lows, labor force exclusion, underemployment and in-work poverty persist because of sub-optimal market arrangements and informality. (The infamous “endo” or end-of-contract scheme comes to mind.)
Filipinos have long anticipated the promise of a demographic dividend, similar to the experience of the Asian Tigers. In short, when the proportion of a population’s labor force swells relative to its dependents, there is a rapid rise in national output.
However, a 2015 study by the National Economic and Development Authority qualifies that expected growth and development from such demographic transitions do not occur automatically and, in the case of the Philippines, may not even occur at all if definitive steps are not taken to ensure that our youth are able to find secure, productive, and rewarding employment.
Inching Up the Rankings
Good jobs are central to the pursuit of a comfortable and stable life for every Filipino. This is the Filipino dream articulated in the national vision called AmBisyon Natin 2040. Critical to sustainable job creation is fostering the competitiveness of the country and its businesses, large and small.
As the local partner of the IMD World Competitiveness Center in its yearly ranking of over 60 countries worldwide, we noted how the Philippines continued to perform very well in terms of its macroeconomic fundamentals ― but then only managed to move up a spot to 41st place in 2016 as it faltered in other equally important aspects of national competitiveness.
The country’s performance was held back by weak institutions, underinvestment in physical infrastructure (transport and communications), and social infrastructure (education and health systems), as well as inefficiencies in business and government. Results for technological readiness, innovation, and talent cultivation were similarly lackluster.
It has not gone unnoticed that the current administration, guided by its 10-point socioeconomic agenda, is working hard to make good on its promises.
Major public transportation projects, bridges, ports, and airports are expected to break ground soon, if not already underway. New legislation for universal access to quality tertiary education and enhanced healthcare coverage, while not perfect, do signal a commitment to human capital development.
Tax and governance reforms, while also imperfect, may establish suitable institutional frameworks and sustainability mechanisms to support their implementation.
But while numbers don’t lie and laws may not falter, projects and projections are only as good as the people who make them.
Infrastructure, tax reform and social welfare programs must be brought to full fruition and thereafter run effectively and efficiently.
Sustainable business models must be developed to ensure the quality and long-term feasibility of infrastructure projects. Meanwhile, the delivery of expanded education and healthcare services must proceed practically and strategically.
To maximize its benefits, it is not enough for tertiary education to be made free and accessible. It must also be made responsive to the evolving needs of industry and built atop solid basic education so students (especially the indigent) are equipped with the skills and competencies to ensure gainful employment.
Universal healthcare to be truly universal must be readily available and accessible especially to the underprivileged, who may continue to be unfamiliar with their options in availing themselves of appropriate care.
Infrastructure projects must be coordinated and integrated into a broader national development plan that involves the private sector and is open to new technologies to minimize bottlenecks, inefficiencies and redundancies.
Policies and reforms must be designed and implemented using a system-wide approach. Policymakers must not only consider the isolated effect of reforms on a target sector, but also the systemic impact on all stakeholders, including implementers and evaluators. Policymakers should also take into account changes in incentive structures and how reforms will interact with other policies.
The Philippine government is finally laying down some of the essential groundwork to sustain the country’s current high growth trajectory.
Ultimately, we will need competent public managers working with responsible business leaders to guarantee that reforms are completed and fairly implemented; and that big spending on public infrastructure and social services creates a real, sustainable impact on our shared prosperity.
Jamil Paolo Francisco is an associate professor of economics and head of research and publications at the Asian Institute of Management. He is also the executive director of the AIM Rizalino S. Navarro Policy Center for Competitiveness. E-mail JFranciscoMT@AIM.edu for more information or visit AIM.edu.