Philippines: Growth without Equity

2005

Mark Turner

The economic news coming out of the Philippines is a mixture of both good and bad. On the positive side, January 2005 was the fourteenth consecutive month of export growth. Furthermore, GDP growth has been sustained. For the four years 2000-2003 it has been over 4 per cent except for one year - and even that was 3.2 per cent. Some preliminary figures suggest that in 2004, economic growth climbed to an impressive 6.1 per cent. But on the negative side, January figures show foreign investment to be falling dramatically while the budget deficit continues to be a major difficulty for government.

While economists debate whether the economy is moving in the right direction or heading for trouble and argue over the meaning and validity of official statistics, many Filipinos know from bitter experience that life is not improving. This is revealed in an Asian Development Bank (ADB) report on poverty in the Philippines which delivers some disturbing findings. Although the ADB gives warnings about methodological problems it claims that the incidence of poverty has actually been increasing in the Philippines since 1985. The triumph of people power and the restoration of democracy have not led to poverty alleviation. Although the percentage of families in poverty has remained fairly stable, this has been at unacceptably high levels of around 33 per cent. More worrying is that the number of families in poverty has grown substantially due to the high population growth rate of 2.36 per cent. Furthermore, the sustained economic growth between 2000 and 2003 has not been pro-poor. Indeed there has been a 10 per cent drop in real family incomes over the period. The ADB suspects that when the 2003 poverty counts are released we will see an increase in poverty over the levels of 2000.

If the national figures are grim reading then the situation in some regions is appalling with provinces in the Autonomous Region of Muslim Mindanao (ARMM), Central Mindanao and Bicol having more than 50 per cent of their populations condemned to lives of poverty. In addition, people living in rural areas are considerably more vulnerable to poverty than the residents of urban areas. But the absolute number of urban families in poverty grew by nearly 11 per cent between 1997 and 2000. In the rural areas, the incidence of poverty has stubbornly remained the same at about 47 per cent since 1985.

The ADB report not only sets out the statistics of poverty but also inquires into its causes. There are few surprises. The factors include weak macroeconomic management, poor job creation, inadequate infrastructure, under-performing agriculture, unfinished land reform, governance issues such as corruption and a weak state, and armed conflict especially in Mindanao. The answer to poverty alleviation lies in multiple initiatives on many fronts - in education, health, industrial growth, improvements in agricultural production, improved infrastructure, reduced corruption and the resolution of armed conflicts. It is a daunting policy agenda which faces President Arroyo's administration if it is to make worthwhile gains in the war against the poverty which currently affects over 25 million people in the Philippines. Not only does the government need good policies and coordination but it also needs to implement the policies efficiently and effectively. This remains its greatest challenge.

WATCHPOINT: Will President Arroyo's policy initiatives make significant gains in the quest for poverty alleviation?

 

About our company:

AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.

Go to top