Part 1 News: Growing Too Slow

The art of the impossible

This is a re-posted opinion piece.

The President’s second State of the Nation Address (SONA) started with more tales of corruption by the Arroyo administration and ended with an appeal for an end to the culture of negativism. But at the end of the nearly hour-long speech, the 10 million unemployed and underemployed are still uncertain of their future. They are asking: is there a decent job waiting for me in the near or distant future?

The potential investors — those whose appetite was stimulated by the promise of public-private partnership (PPP) last year — are wondering, what happened to PPP? How can such an important arrangement for essential public infrastructure and government services that was explained by the President with high hopes and possibilities last year be suddenly forgotten? Not a word about PPP in SONA II.

What went wrong? The public deserves some explanation. That’s what the annual SONA is all about: it builds on previous SONAs even as it talks about the future.

President Aquino proudly announced that 1.4 million jobs were created from April 2010 to April 2011. What he failed to mention is that almost half of those newly created jobs — 679,000 workers to be exact — were in agriculture. Most were low-paying, part-time, and poorly productive jobs.

How else can one explain how the agriculture sector that has barely grown compared to its pre-El Niño days, absorb so many workers? Rapid growth in jobs in agriculture accompanied by unchanged or shrinking jobs in industry is a sign of retrogression, not progress. Has agriculture become the employer of last resort for the unskilled workers?

The Philippines’ rate of unemployment is the highest in this part of the world. At 7.2% unemployment, it suffers in comparison with Thailand, Vietnam, Malaysia, and Indonesia.

But what’s the government’s response to the unemployment problem? An optimistic and long-term solution. Mr. Aquino said: “The number of jobs generated in our country can only grow from here. According to Philjobnet.website, every month there are 50,000 jobs that are not filled because the knowledge and skills of job seekers do not match the needs of the companies.” He added: “We will not allow the opportunity to go to waste; at this very moment, DOLE, CHED, TESDA, and DepEd are working together to address this issue. Curricula will be reviewed and analyzed to better direct them to industries that are first in need of workers, and students will be guided so that they may choose classes that will arm them with skills apt for vacant jobs.”

That’s well and good. But that’s for the long-term. What about the 1.3 million college graduates and undergraduates who are unemployed right now?

The other government response is the expansion of the Pantawid Pamilyang Pilipino Program. The plan is to expand the number of beneficiaries from 1.0 million in 2010 to 3.0 million poor Filipinos by the end of 2012. But that too is long term. It won’t be of any help in creating jobs in the near future.

Decent jobs will be created if the economy could grow more rapidly and sustainably. With a fast growing population and a large army of unemployed and underemployed, the Philippines cannot be satisfied with a 5% growth. Such growth rate would have capability to create a large number of decent jobs. Recent evidence supports this view: during the past decade, when GDP averaged 4.9%, income inequality has not changed. In fact, it has deteriorated slightly in 2009.

More than one-third of Filipinos were poor based on official numbers. The proportion of poor people was 34.0% in 2000, 34.7% in 2003, 36.6% in 2006, and 37.3% in 2009. And because population has been growing rapidly, the number of Filipinos who are poor has been rising, despite the decade-long average growth of 4.9%.

Compared with its ASEAN-5 neighbors, the Philippines has the highest income inequality. Last year, the registered Gini coefficient for the Philippines was 44%, higher than Thailand’s 42.5%, Indonesia’s 39.4%, Malaysia’s 37.9% and Vietnam’s 37.8%. (The Gini coefficient is a measure of the inequality of a distribution. A value of 0 means total equality, a value of 1 total inequality.)

What all these hard facts suggest is that the Philippines has to grow much more rapidly, in the area of 7 to 8%, on a sustainable basis, say for a period of 7 to 10 years, to make a significant improvement in the lives of Filipinos.

Such strong, sustainable growth requires a significant flow of foreign direct investments (FDIs). Sadly, while FDIs continue to flow to our ASEAN-5 neighbors, they have contracted in the case of the Philippines.

In his second SONA — just like in his first — Aquino failed to say anything to significantly change investor confidence. Is his zero-tolerance for corruption sufficient to attract foreign investors? This appears to be is the ultimate challenge for Aquino: can he propel the economy into a higher, sustainable growth path without heavy inflows of FDIs?
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By: Benjamin E. Diokno – Core
Source: Business World, Opinion, July 27, 2011
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