For Inclusive Economic Growth, Keep Investing in People

Dindo Manhit, President, Stratbase-ADRi

The Aquino administration has touted the 6.3 percent Gross Domestic Product (GDP) growth in the fourth quarter of 2015.1 The GDP growth was primarily driven by the services sector, which grew by 7.4 percent, in comparison with 5.6 percent in the fourth quarter of 2014. Growth in the services sector offset the weaker performance of industry, which had a growth rate of only 6.8 percent in comparison to 9.1 percent for the same period in the previous year.2

We monitor Philippine macroeconomic indicators to keep track of the country’s progress and get a sense of its overall direction. In previous blogs, I have used these figures to concretize the discussion and highlight needs in key industries, most recently in agriculture and manufacturing. From a country-wide perspective, however, positive figures are primarily relevant insofar as they represent opportunities to lift more Filipino households out of poverty and, for negative figures, the reverse.

The term ‘inclusive growth’ has been on the international agenda, including at summits like APEC, from before 2010. Although the current Aquino administration has made it a go-to term for its anti-poverty strategy, in some respects it has been quicker to highlight its contributions to growth than its contributions to inclusivity.

In our effort to keep inclusivity on the national agenda, we dedicated one chapter of our book, Thinking Beyond Politics, to the subject. In “Poverty, Inequality, and Inclusive Growth”, Dr. Epictetus Patalinghug, ADRi Trustee, sheds light on the meaning of inclusivity and how it has been applied within the Philippine political economic context.

2vm82he

Democratization, not only creation, of opportunities
Referring to Juzhong Zhuang, Dr. Patalinghug defines “inclusive growth” as growth with equal opportunities focusing on both creation and democratization of opportunities.3Growth is inclusive when it enables all members of a society to participate in and contribute to the growth process on an equal basis regardless of their individual circumstances.4 One may then deduce “inclusive growth” as having four (4) main features: a.) sustained output growth over the next decades; b.) broad-based across economic sectors; c.) productive employment opportunities for a great majority of the country’s working age population; and d.) poverty-reducing both in the urban and rural areas.5

Based on the World Economic Forum Inclusive Growth and Development Report 2015, the growing political consensus on inclusive growth is rooted in significant widening of inequality in recent years which affects economies at various levels of development.6 Across the Organisation for Economic Co-operation and Development (OECD), the average income of the richest 10 percent of the population is about nine times that of the poorest 10 percent.7 Furthermore, the benefits of growth have failed to trickle down to low and medium-income households: over the last decade, median household income has stagnated in several advanced economies (such as Germany) and even declined in the United States, rendering the middle class highly vulnerable to poverty.8

Among the developing economies, sustained strong growth has succeeded in lifting many citizens out of absolute poverty but improvements in living standards have failed to catch up with GDP growth or be distributed evenly.9 This is most evident in Eastern Europe and many fast-growing emerging Asian economies such as China, India and Vietnam as well as some African economies, namely Zambia and Kenya.10

Given these convergent trends both across the OECD and developing economies, a new model of economic growth and development becomes more necessary.11 National leaders as well as heads of major international economic organizations such as the International Monetary Fund (IMF), World Bank and OECD have begun bringing improvements in social inclusion at the heart of their respective economic programs.12

16lwd2p

The Pantawid Pamilyang Pilipino Program

Since assuming office in 2010, President Aquino identified poverty alleviation as one of his administration’s main anchors along with good governance.13The centerpiece of his administration’s anti-poverty program is Pantawid Pamilyang Pilipino Program (4Ps) also known as conditional cash transfer (CCT) program.14

16m4m15

Over 2,800 beneficiaries of the government’s conditional cash transfer (CCT) program flocking to the gymnasium of Dolores in Eastern Samar to receive their cash grants. (Source: Manila News Online, http://www.manilanewsonline.com/smart-natcco-local-coops-disburse-dswd-conditional-cash-grants-in-eastern-visayas/.)

Dr. Patalinghug elaborates on the Pantawid Program whereby the government provides cash incentives to poor households on the condition that they invest in the health and education of their children.15 Household beneficiaries are provided with cash grants of up to Php 15,000 per year for a maximum of three eligible children aged 0-14.16 The program started in 2007 with a budget of Php 50 million to support 6,000 poor households.17 It was expanded in 2008 with a total budget of Php 299 million to support 300,000 poor households, and again in 2014 with a budget of Php 62.6 billion to assist 4 million poor households.18

The poverty-reducing impact of the Pantawid Program may not be immediate; but as human capital investment primarily on education and health care, it provides the youth an opportunity to climb the socio-economic ladder which on an aggregate level will reduce inequality. Nevertheless, Dr. Patalinghug highly recommends that government efforts to expand the Pantawid Program ought to be complemented with an infrastructure program component that builds more schools and health clinics for the poor.19

To read the entirety of “Poverty, Inequality, and Inclusive Growth”, click here.

1 Philippine Statistics Authority, Philippine Economy Grew by 6.3 percent in Q4 2015; 5.8 percent in 2015, 28 January 2016, Philippine Government.
2 Ibid.
3 Epictetus E. Patalinghug, PhD, “Foreign Direct Investment, Exports, and Philippine Economic Growth,” Thinking Beyond Politics: A Strategic Agenda for the Next President (Quezon City: Rex Publishing, 2015), p. 74-75.
4 Ibid, p. 75.
5 “The Growth Report: Strategies for Sustained Growth and Inclusive Development”, Commission on Growth and Development (2008), https://openknowledge.worldbank.org/bitstream/handle/10986/6507/449860PUB0Box3101OFFICIAL0USE0ONLY1.pdf?sequence; E. Ianchovichina and S. Lundstrom, “Inclusive Growth Analytics: Framework and Application”, Policy Research Working Paper no. 4851 (World Bank, 2009).
6 Richard Samans et al., “The Inclusive Growth and Development Report 2015”, World Economic Forum Insight Report, September 2015, p. 1
7 In It Together: Why Less Inequality Benefits All (Paris: OECD Publishing, 2015); “Focus on Inequality and Growth” (OECD, December 2014).
8 P. Krugman, “Why We talk about the One Percent”, The New York Times, 17 January 2014, accessed 17 February 2016, http://krugman.blogs.nytimes.com/2014/01/17/why-we-talk-about-the-one-percent/?_r=0.
9 I. Ali and J. Zhuang, “Inclusive Growth toward a Prosperous Asia: Policy Implications”, ERD Working Paper no. 97 (2007), http://www.adb.org/sites/default/files/pub/2007/WP097.pdf.
10 Regional Economic Outlook: Sub-Saharan Africa: Fostering Durable and Inclusive Growth” (Washington DC: IMF, April 2014), http://www.scribd.com/doc/220088938/IMF-Regional-Economic-Outlook-Sub-Saharan-Africa-Fostering-Durable-and-Inclusive -Growth-April-2014.
11 Ibid.
12 Ibid.
13 Celia M. Reyes and Aubrey D. Tabuga, “Conditional Cash Transfer Program in the Philippines: Is it Reaching the Extremely Poor?”, The PIDS Discussion Paper Series No. 2014-42, December 2012, p. 2.
14 Ibid.
15 Epictetus E. Patalinghug, PhD, “Foreign Direct Investment, Exports, and Philippine Economic Growth,” Thinking Beyond Politics: A Strategic Agenda for the Next President (Quezon City: Rex Publishing, 2015), p. 88.
16 Ibid.
17 Ibid.
18 Ibid.
19 Ibid.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s