Study traces poverty incidence to vested interests

MANILA, Philippines - The ranks of poor Filipinos have risen by more than three million despite the reported economic growth over the past several years, as the government continues to be influenced by politicians and businessmen with vested interests, according to advisory and research group Stratbase Research Institute.

Stratbase, in the third quarter issue of its quarterly publication Spark, cited data from the World Bank showing that the number of poor Filipinos living in poverty increased by 3.4 million between 2003 and 2009. The government’s National Statistical Coordination Board confirmed that the magnitude of poor population increased from just 19.8 million in 2003 to 23.14 million in 2009. 

Poverty incidence, in terms of percentage of poor people, also increased from 24.9 percent to 26.5 percent during the period, data from the NSCB showed.

Stratbase said poverty rose because the Philippine economy, being under the influence of rent seekers or those with vested interests, has been one of the poorest performers in Asia over the past 50 years. A report by former SocioEconomic Planning Secretary Cielito Habito noted that while East Asian economies posted average annual GDP growth rates from 3.6 to 6.0 percent between 1960 and 2008, the Philippines only managed an annual average increase of 1.4 percent during the same period.

With population in the country still increasing at more than two percent per year, real per capital incomes have risen only by 20 percent from 1981 to 2009.

Despite this meager economic growth in the Philippines, poverty incidence rose because such growth has not been as effective in reducing poverty as in the rest of Asia, according to Stratbase. It cited a report from the Asian Development Bank (ADB) which found that for every one percent growth in gross domestic product (GDP), poverty incidence has gone down by an average of 1.5 percent across the world and two percent within Asia.

In contrast poverty incidence in the Philippines had actually risen since 2003, a time when the economy is thought to have grown very well. “In short, not only is the country’s growth record dismal, but its capacity to share the benefits of such growth is deplorable,” said Prof. Victor Andres C. Manhit, president of Stratbase.

Stratbase said no less than the National Economic and Development Authority, in its Philippine Development Plan (2011-2016), admitted that growth in the Philippines had not been inclusive so far. 

The plan warned that inclusive growth was an ideal that the country has perennially fallen short of and that this failure has led to several negative results including mass misery and marginalization, overseas exodus of skills and talents, political disaffection and alienation, leading finally to threats of the state itself.

To make economic growth more inclusive, Stratbase cited the need to pursue reforms in government that would guarantee civil and political liberties from the influence of those with vested interests, including the grafters, rent seekers, influence peddlers and the hoodlums in robes, business suits and uniforms.

Such corruption is among the hurdles cited by the World Economic Forum (WEF) in doing business in the Philippines. Corruption, an inefficient government bureaucracy and an inadequate supply of infrastructure topped the list of the WEF Global Economic Competitiveness Report 2011-2012 as the most problematic factors for doing business in the country.

Doing business in the Philippines is hampered by the inefficient process and legal and under-the-table fees that businesses have to shell out, according to Stratbase.

Stratbase said that because those with vested interests exercise great influence in government, political leaders and decision makers tolerate inefficiencies in the market such as protectionist policies, bribery and poor infrastructure. 

“The principal flaw in the Philippine polity is the existence of a weak state that is in turn the object of competition among various elite factions at various levels of governance — from national to the lowest level,” said Prof. Manhit.

He said improvements in governance and institutional arrangements will benefit both domestic and foreign investors as well as a broad coalition of domestic classes and interests, including the poor and the powerless. 

“Civil and political freedom are expected to facilitate the functioning of the market economy by developing a more predictable and stable institutional framework. This is for engaging in productive transactions, including better protection of property rights. This has a positive influence on economic growth through higher savings and investment rates and through lower rents associated with corruption, government controls and the lack of respect of the rule of law,” said Stratbase.

“These liberties are usually conducive to faster economic growth because of the need for political legitimacy on the part of the government undertaking economic reforms with possible short-term costs, the need for an independent judicial system to carry out a successful economic liberalization, and the fast that respect for property rights is most often achieved in societies where civil liberties and political rights are guaranteed,” it added.

Stratbase challenged the incumbent Aquino administration to work for the welfare of the majority, instead of for just a few with vested interests.

“Elected leadership must firmly hold the line against vested interests and political machineries that are poised to advance their position to the grave detriment of the majority. A strong state, after all, requires strong leadership that upholds national interest and development above anything else,” it said.

Stratbase provides clients with insights of the economic and political developments in the country on a quarterly basis. Both are aimed at providing a macro description of the fundamental indicators of economic and political trends in the Philippines.

On a quarterly basis, Stratbase issues Spark, an online newsletter that covers socio-political and economic analysis of timely issues that affect the direction of the economy and political landscape governing the Philippines.