Economic game plan for Asia’s rising star

Some observers have been either openly declaring or implying that the government does not have a “game plan” for the Philippine economy. This had me wondering — if this observation is true, then where did all the positive economic developments being lauded come from?

I refer to reports that the Philippines is now Asia’s rising economic star. It has attained investment grade for the first time ever;  BSP has reported that business confidence is at such a high level that businessmen are planning expansion and hiring more people; tourist arrivals are at its highest level.  International economic agencies have predicted that Philippine economic growth will continue to be at the 6% level or higher.

True, there are socio-economic reports that still yield mixed results such as the incidence of hunger as reported by a recent survey of the Social Weather Station. The report showed that there was a big reduction in hunger incidence in Metro Manila and Luzon. However, there was a slight increase in hunger incidence among households in the Visayas.  It was Mindanao that reported the highest increase.  According to DSWD chief, Dinky Soliman, the results in Mindanao external circumstances, typhoon Pablo and the refugees from Sabah, were very strong determinants.

While many foreign and Filipino observers have said that what is happening in the Philippine economy is the beginning of an economic miracle, I do not think they literally mean a “miracle” in a religious sense.   Neither can anyone logically say that all these economic developments are the result of a confluence of coincidences.

I decided to have a conversation with Cayetano “Dondon” Paderanga on this topic. Dondon was the NEDA head during the first two and a half years of the present government. I recall that in 2009, after the public declaration of the candidacy of Noynoy Aquino for the presidency, he was part of the economic planning team for the Aquino candidacy. At the start of the campaign, he told me that it was his candidate who had the most solid economic plan. Here are the highlights of our conversation.

From the start, the President wanted an economic development plan that would provide the framework for attaining his vision for the Philippines and a 16-point agenda.

The vision for the Philippines was a country with:

1. A re-awakened sense of right and wrong, through the living examples of our highest leaders;

2. An organized and widely shared rapid expansion  of our economy through a government dedicated to housing and mobilizing our people’s skills and energies as well as the responsible harnessing of our natural resources;

3. A collective belief that doing the right thing does not only make sense morally, but translates into economic value as well;

4. Public institutions rebuilt on the strong solidarity of our society and its communities.

Actually, the game plan is in the Philippine Development Plan which, admittedly, is heavy reading. However, for me personally, the most important part is Chapter One which says that the first step is to address the bottlenecks that have been the obstacles to Philippine economic growth for many decades. There are four major bottlenecks that have been identified.

The first major bottleneck is systemic and widespread corruption in all branches of government – executive, legislative and the judiciary.  The results of this are bad governance, crony capitalism and high incremental costs. The World Bank estimated, at the start of the Aquino government, that the cost of corruption in the Philippine was as high as 40% of the government’s annual budget.

This is the reason the President has been so focused on his anti-corruption crusade and good governance while continuing to remind the people walang mahirap kung walang corrupt.

The second bottleneck is the lack of infrastructure to support productive activities. Although we have a population of over 100 million,  small and medium sized companies have a hard time catering to a national market. A producer in Mindanao faces lack of infrastructure or high shipping costs that prevent him from catering to the Metro Manila or even the Visayas market. The administration intends to emphasize the integration of the currently fragmented national market through infrastructure investments in roads, bridges, airports and ports in order to present our producers with a much larger domestic market.

After streamlining and improving the government programming and implementation process, the government has now embarked on a very ambitious infrastructure-building program.

The third bottleneck is in the area of social development which means increasing investment in education, health and nutrition. Education! Education! Education! This is the mantra of every knowledgeable social scientist for addressing the root causes of poverty and youth unemployment. This is the reason the administration has increased the education budget by an annual average of 20% and why the K to 12 school program has become a centerpiece in this government’s development plan. Universal health coverage through the expansion of the PhilHealth program is also a vital part of the plan.

The fourth bottleneck is environmental degradation brought about by climate change, illegal logging, pollution and lack of solid waste management. This administration has revived and significantly increased the emphasis on sustainable development and environmental protection. Institutions like the Philippine Council for Sustainable Development and the Climate Change Commission have been revived and strengthened.

The lag between economic growth and its positive effects on poverty alleviation and unemployment, however, needs to be addressed. During this lag time, there will have to be specific programs aimed at providing assistance to the poor. That is what makes programs like the Conditional Cash Transfer; premium-free PhilHealth coverage for the poor; and free and easy access to classrooms fully equipped with educational materials, chairs and even toilets are all very critical at this time.

There is not enough space in this column to talk about the other chapters in the Philippine Development Plan and the 16-point agenda. But because the four bottlenecks are being vigorously addressed, the next three years will see sustained economic growth, a continuing decrease in the poverty rate and unemployment, and a continuing increase in the quantity and quality of social services. And Dondon adds that we will see an increase in the quality of jobs, which will be good news for the middle class and the OFWs who may begin thinking of coming home.

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