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01 In Pursuit
of Inclusive
Growth
In Pursuit of Inclusive Growth 17
In pursuit of inclusive growth
What is Inclusive It is high growth that is
sustained
Growth?
Viewed by majority of Filipinos, the Inclusive growth means, first of all,
record of economic and social progress growth that is rapid enough to matter,
up to now has proved unsatisfactory for given the countrys large population,
three reasons: first, its pace has been slow geographical differences, and social
when measured against the achievements complexity. It is sustained growth that
of the countrys neighbors; second, the creates jobs, draws the majority into
Inclusive growth means, first benefits of that progress have not been the economic and social mainstream,
of all, growth that is rapid broadly shared; and third, issues of and continuously reduces mass
enough to matter, given the massive corruption and of questioned poverty. This is an ideal which the
countrys large population, political legitimacy have undermined country has perennially fallen short
geographical differences, and the peoples sense of ownership of and of, and this failure has had the most
social complexity. It is sustained control over public policy. Growth has far-reaching consequences, from mass
growth that creates jobs, draws not only lagged, it has failed to benefit the misery and marginalization, to an
the majority into the economic majority, who feel increasingly alienated overseas exodus of skill and talent, to
and social mainstream, and because their political institutions provide political disaffection and alienation,
continuously reduces mass little relief and have drifted beyond their leading finally to threats to the
poverty. This is an ideal which control. Growth, in short, has failed to be constitution of the state itself.
the country has perennially inclusive.
fallen short of, and this failure
has had the most far-reaching
consequences, from mass
misery and marginalization, to
an overseas exodus of skill and
talent, to political disaffection Table 1.1 Annual Average Growth Rate of Real Per Capita GDP:
and alienation, leading finally to 1950-2009 (in percent)
threats to the constitution of the
state itself.
1951-60 1961-70 1971-80 1981-90 1991-00 2001-09
Hong Kong 9.2 7.1 6.8 5.4 3.0 3.2
Singapore 5.4 7.4 7.1 5.0 4.7 2.0
Korea 5.1 5.8 5.4 7.7 5.2 3.5
Taipei, China 7.6 9.6 9.3 8.2 5.5 2.7
Malaysia 3.6 3.4 5.3 3.2 4.6 2.2
Thailand 5.7 4.8 4.3 6.3 2.4 3.1
Indonesia 4.0 2.0 5.3 4.3 2.9 3.8
Philippines 3.3 1.8 3.1 -0.6 0.9 2.3
Sources: Asian Development Bank (ADB), 2010; National Statistical Coordination Board
(NSCB)
*Average for the period 2001-2010
30.0
25.0
Unemployment
20.0
Underemployme
15.0
10.0
5.0
0.0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Note: Starting April 2005, the Labor Force Survey (LFS) adopts the new definition of unemployment.
Note: Starting
Source: April
National 2005, Office
Statistics the Labor
(NSO)Force Survey adopts the new definition of unemployment
Source: National Statistics Office (NSO)
Historically the Philippine economy after 2005 cannot be compared owing to
has been mired in tepid and erratic a change in the unemployment definition
growth. Since 1981, growth has adopted that year). Underemployment
averaged only 3 percent annually. This has also been widespread, with rates
is well below the postwar growth rates hovering at around 18-20 percent in the
of several high-performing Asian late 2000s. This remarkably contrasts with
economies (Table 1.1). countries such as PR China, Malaysia,
and Thailand, where unemployment has
With population still increasing at remained at 4 percent or lower over the
more than 2 percent per year, per- same period.
capita incomes have risen only 20
percent in real terms from 1981 and reduces poverty.
to 2009. Over the same period,
by comparison, per capita income Under the Millennium Development
increased four-fold in Malaysia, five- Goals (MDG), the country committed
fold in Thailand, and 11-fold in PR itself to halving extreme poverty from
China, an era in which absolute mass a 33.1 percent in 19911 to 16.6 percent
poverty was basically eradicated in by 2015. This goal can still be achieved
these countries. provided that determined efforts are
undertaken (Figure 1.2). Mass poverty
that massively creates jobs, remains the critical challenge, with the
poor accounting for more than one-fourth
Quality economic growth means (26.5%) of the population as of 2009. A
primarily that rapid output increases deep cause for concern is the fact that
are translated into employment the incidence of poverty has remained
creation. Unfortunately, rates of essentially stagnant for almost a decade
unemployment have remained high now. Given the countrys population
(Figure 1.1), averaging 10 percent in growth, this actually means that the
19902005 and 7.5 percent in 2006- number of poor families and persons has
2010, (note that the data before and been increasing through time. This again
1
This uses the revised official methodology approved on February 1, 2011 by the NSCB. Under the older
methodology, the poverty incidence for 1991 was 45.3 percent.
Figure
Figure 1.2Poverty
1.2: Poverty incidence
Incidence and thethe
and GiniGini
ratio: 1991,1991,
ratio: 2003, 2006,
2003,2009
2006, 2009
50
40
GIN
30 Sub
Pov
20
10
0
1991 2003 2006 2009
GINI ratio
index Subsistence Incidence Poverty Incidence
Sources:
Sources:National Statistical Coordination Board (NSCB), National Statistics Office
NSCB, NSO
Table 1.2 Poverty and Inequality in Selected Countries (most recent available)
Table 1.2: Poverty Officialand Inequality
poverty in East Share
Asia (most
of
Share of recent available) Gini Ratio
population
incidence in % below $1.25 per Day, % (2004/2005/2006/2007)1/
(2007/2008) 1/ populati
(2004/2005/2006/2007) 2/
China 4.2
on below15.9 0.415
Official poverty $1.25 per Gini
Indonesia 14.2 29.4 0.376
incidence in % Day, % Coefficient
Malaysia 3.6
(2007/2008) 1/ (2004/202.0 /2006/2007 0.379
50.0
45.0 1994 1995
Philippines 24.1 22.5
40.0
Indonesia 31.1 31.9
35.0 Malaysia 41.2 43.6
30.0 Thailand 40.3 42.1
25.0
20.0
15.0
10.0
5.0
Sources: ADB-Key Indicators 2010; Official Country Statistics websites; NSCB
0.0
falling to just 15.6 percent in 2010. In economic goals under the Plan.
contrast, investment in Malaysia and Currently, power is already in short
Thailand soared to over 40 percent of supply and unreliable in some parts of
GDP, and although they have dipped the country.
since the Asian crisis, their levels are
still way above that of the Philippines as are major gaps and
An inefficient transport (except for Malaysia). Not only is the lapses in governance,
network and unreliable Philippines investment ratio low, it has
power supply have been also been falling since the mid-1990s, Weak institutions and governance
identified as the most down to 15.6 percent in 2010. This fall failures are the second major barriers
significant infrastructure in capital accumulation is a constraint to investment. On the positive side,
constraints on overall to long-term economic growth and with peaceful leadership-changes
growth. The percentage of employment-generation. through orderly and credible
paved roads to total roads in elections, the nation has put behind
the country remains one of Weak investment particularly in the it a period of political instability
the lowest in the Southeast face of a surfeit of national saving and deep mistrust of government
Asia. Similarly, the quality is a clear sign of a lack of productive actions, both of which were rooted
of the countrys port, air, opportunities in the economy. Inadequate in allegations of corruption in major
and railroad infrastructure infrastructure and a resulting poor economic projects and the perversion
leaves much to be desired. logistics network have been identified of vital political processes.
Unless urgent action is as among the critical constraints to
taken, the hitherto slow investment and growth (ADB, 2007). The advent of a new administration
pace of investments in Besides stimulating investment itself, is an opportunity for government
power-generation threatens infrastructure helps improve total factor to regain the citizens trust, lay bare
not only growth but also the productivity, enabling the country to the truth regarding past abuses, and
realization of many critical produce more from each amount of input, instil civic vigilance for the future.
social and economic goals effectively lowering unit-cost. But stability and a new atmosphere
under the Plan. Currently, of openness and accountability are
power is already in short An inefficient transport network and only the first steps in removing
supply and unreliable in unreliable power supply have been the governance-based fetters to
some parts of the country. identified as the most significant investment and growth. A great deal
infrastructure constraints on overall more remains to be done in creating
growth. The percentage of paved roads a governance climate that encourages
to total roads in the country remains massive investment and wins the
one of the lowest in the Southeast Asia. peoples support. The country
Similarly, the quality of the countrys continues to suffer from a reputation
port, air, and railroad infrastructure leaves for bureaucratic inefficiency, excessive
much to be desired (Table 1.3). Unless red tape, and widespread corruption.
urgent action is taken, the hitherto slow In the 2011 Doing Business ranking,
pace of investments in power-generation for example, the Philippines placed
threatens not only growth but also the 156th out of 183 countries. After three
realization of many critical social and decades of trade-policy reform, it
Source:Source: SY 1991-1992
SY1991-1992 to SY 1998-1999,
to SY 1998-1999 Department
- DepEd Statistical of Education (DepED) Statistical Yearbook;
Yearbook
SY
SY1999-2000
1999-2000 to to latest
latest,- Basic
BasicEducation
Education Information System (BEIS)
Information System (BEIS);/ Basic
Basic Education
Education Statistics
Statistics (Fact Sheet as
(Factsheet as of December 5, 2008); www.deped.gov.ph