Politics of poverty in the Philippines
By Joel D Adriano
MANILA - Philippine President Gloria Macapagal-Arroyo frequently deflects from
her mounting political troubles by drawing attention to her alleged economic
accomplishments, including buoyant gross domestic product (GDP) growth of 7.3%
last year, the fastest such expansion in 31 years.
Since assuming the premiership in 2001, Arroyo has overseen consistently faster
growth than previous recent administrations. Her advisors like to note that
average annual GDP growth has been 4.9% under Arroyo's near seven-year tenure,
comparing
favorably with the 4.1% average seen under president Corazon Aquino and 3.1%
under Fidel Ramos.
However, those statistics overlook the inconvenient truth that economic growth
has wholly failed to buoy the country's massive poor population and instead has
disproportionately lifted the country's entrenched elite - from which Arroyo's
family famously hails.
The state-run National Statistical Coordination Board (NSCB) showed in its
latest poverty survey released this month that the number of "poor" Filipinos
grew from 23.8 million in 2003 to 27.6 million in 2006. Government officials
have only reluctantly acknowledged the increase in poverty, despite the fact
that the survey's summary findings were first released last October.
The survey also concluded that average family income fell by 2.7% over the
period from 2003 to 2006 and the number of "food-poor" individuals - those who
cannot regularly afford to buy even basic foodstuffs - jumped 14% over the same
period. According to the survey's findings, one out of every three Filipinos is
"poor", while over 51% of fisherfolk and 47% of farmers live below the poverty
line.
The statistics fly in the face of the Arroyo administration's claims that the
government's pro-growth policies have actually reduced poverty levels - though
the premier has stood steadfast behind her earlier pronouncements. Cabinet
secretary Ricardo Saludo insists poverty levels have fallen by 4.8% between
2000 and 2006, though it's unclear whose statistics he is citing. To underscore
that party line, Arroyo's government has recently launched a series of
television advertorials, replete with grassroots testimonials from people who
claim to have benefited from recent economic growth, to counter the findings.
Some economic analysts say those upbeat assessments are more spin than reality,
fudged by the government lowering the statistical threshold of what it means to
be poor. According to the latest government measure, a family of five falls
under the poverty line if it earns the peso equivalent of US$157 per month,
meaning each family member must get by on just over a US dollar a day, or the
average cost of one meal.
If that threshold is increased to $2 a day per person, the World Bank somewhat
conservatively estimates that 40% of Filipinos are now living below the poverty
line.
The real poverty rate, some local researchers contend, could be even higher
than the NSCB figures indicate. According to Rosario Bella Guzman, executive
director of the think-tank IBON, nearly 72% of Filipinos surveyed by her
organization last year considered themselves poor.
So if the Philippine economy is growing at such high speed, why are the
benefits not trickling down to the masses? In part that's because Arroyo's
economic policies, as with previous administrations, have often been designed
to favor a handful of big business and landowning families. Her government, for
instance, has failed due to legal technicalities to implement meaningful land
reforms, initially aimed at redistributing huge tracts of land from rich to
poor.
Arroyo has surrounded herself with business cronies and loyal supporters rather
than tackling competition-promoting structural reforms which would allow for
more equitable and broad-based economic growth. While her government has issued
a series of directives aimed at cutting bureaucracy, curbing corruption and
addressing other red-tape and barriers to doing businesses, nothing concrete
has been done to force open long-monopolized local markets.
That's skewed growth in favor of the rich over the poor and raises hard
questions about sustainability, some economists say. Alessandro Magnoli Bocchi,
the World Bank's senior economist for the East Asian and Pacific Region, has
noted the country has broken with conventional economic wisdom in accomplishing
fast GDP growth simultaneous with a real decline in investment and a slowdown
in export growth.
Economic ironies
That irony is a disturbing reflection of stubborn structural imbalances in the
local economy. About 60% of all economic activity in the Philippines arises
from the informal sector, according to the Philippine Institute of Development
Studies, a think-tank. Statistically, that includes the approximate $15 billion
that enters the economy from overseas workers' remittances, which in turn
powers consumer spending and more recently a mini-boom in real estate and
construction.
Michael Clancy, chairman and chief executive officer of the Philippine Business
Leaders Forum, recently warned that recent buoyant economic growth derives
mainly from consumption, which is artificially skewed by remittances. "Take
[remittances] out of the equation and domestic consumption would just about
collapse. To build a Philippines that is genuinely strong, it needs jobs and
wealth generated within the domestic economy and that means foreign direct
investment," Clancy said.
Meanwhile, the industrial sector employs a mere 15% of the national labor
force, the smallest percentage in industrialized Southeast Asia according to
World Bank statistics.
A recent study by the United Nations Industrial Development Organization showed
that among the 10-member Association of Southeast Asian Nations, the
Philippines has long lagged its regional neighbors in terms of industrial
growth, which expanded only 7% over the period spanning 1990-2002.
In comparison, Malaysia grew 100%, Thailand 92% and China 356% over the same
12-year period. And that low investment trend, by and large, continues today:
the World Bank estimates overall investment in the Philippines has been
stagnant in real terms since the 1997-98 Asian financial crisis and as of 2006
had declined as a share of GDP to below 15% - low by regional standards.
Those low statistics are reflected in the country's consistent low rankings in
attractiveness to foreign direct investments and competitiveness surveys, which
give the Philippines low marks for its comparatively high labor, tax and
electricity rates, as well as poorly maintained infrastructure and often
inconsistent policies, regulations and laws relevant to foreign investors.
Without new foreign investments, there are precious few new well-paid jobs
available outside of low-wage earning agriculture, fisheries, mining, basic
back-office outsourcing and government service. As a result, unemployment has
remained stubbornly high at over 10% throughout Arroyo's term. Meanwhile,
underemployment had grown to 22.7% last year, up from 17.6% two years ago.
To bring those politically volatile figures down, Arroyo decided two years ago
in a bizarre move to exclude those who have no employment and allegedly are not
actively seeking jobs and those who depend fully on remittances sent by their
families working overseas from the official labor force. With that statistical
trick, her government estimated the unemployment rate was only 6.3% as of last
October.
Meanwhile, the World Bank's Bocchi said the government's low investment rate,
including in transport and education, has created bottlenecks for private
investment. That means that lower income groups are not sharing proportionately
the benefits of recent fast economic growth, which some economists estimate has
actually widened rather than bridged income inequality levels, where the top 5%
of Filipino households currently account for nearly one-third of the national
income, while the poorest 20% fetch a mere 6% of the pie.
The Asian Development Bank recently suggested that cleaning up endemic
corruption would go a long way towards improving the Philippines' creaky
infrastructure, which it noted has suffered over the years from leakage and
misappropriation of funds. According to World Bank estimates, some 20% of the
government's annual budget is lost to corruption. (The government often points
to a recent survey of businessmen conducted by the Social Weather Service which
shows payment of bribes has steadily declined during her tenure.)
Last November, the multilateral lender caused a political furor after it froze
a $232 million loan for a road project because of alleged corruption. World
Bank vice president for the East Asia and Pacific Region, Jim Adams, said in a
statement from Washington that between 2003 and 2006 it had rejected three
successive biddings "because of strong signs of collusion and excessive
pricing" within the Public Works Department, without naming any specific
officials. Reaffirming that assessment, the independent Hong Kong-based
Political and Economic Risk Consultancy stated in its annual survey of
corruption released on March 10 that "for the second consecutive year, the
Philippines has the dubious distinction of being the worst-rated country" in
East Asia.
Given the numerous scandals now surrounding Arroyo's administration, including
explosive charges that a top election official and her own husband received
massive kickbacks on a state-tendered broadband Internet infrastructure deal
tendered by the state to a Chinese company, corruption-busting clearly isn't at
the top of her government's agenda. Meanwhile, even as the economy grows, the
country's impoverished masses just get poorer.
Joel D Adriano is an independent consultant and award-winning freelance
journalist. He was a sub-editor for the business section of The Manila Times
and writes for Asean BizTimes, Entrepreneur Philippines, Masigasig and People's
Tonight.
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