The turning point, and other thoughts on the Philippine economy

A neighbor who works at the Department of Trade and Industry hitched a ride with me this morning. Twenty minutes into our trip, we started talking about the economy and politics. He raised a very valid point when I asked him about the state of SMEs (small to medium enterprises) here in our country.

Our people’s mindsets have to change. When people become their own entrepreneurs, then the hold of the traditional politicos will be broken. Hindi na kasi sila aasa sa kanila eh. (They will no longer depend on them.)

Exactly. When you put the power in the people, then they wouldn’t be so easily swayed by politicians and their false promises. The Philippine blogosphere is a good example of that kind of ’empowerment’. This is a great way, I think, of summarizing the political implications of entrepreneurship, which a lot banner as a key economic solution in our country.

And as I checked some student papers this morning, someone raised a very good point about our economic history:

During the Spanish and American colonial period, the ruling classes were the Spaniards and the Americans, and the economic classes usually consisted of the Chinese traders and merchants. While the native Malay population comprised the majority of the masses, they were discouraged from thinking independently and were made dependent on the ruling and economic classes.

With the advent of Philippine independence, the ruling class was replaced by the Filipinos, but the economic and political structure remained the same. Technology research and development was not encouraged, instead we were encouraged to purchase all our equipment and produce from abroad.

While that no longer completely holds true, it gives us a glimpse into why we are where we are. I’ve written at length about this before, in the entry “The world is flat, but the Philippines isn’t” and opined that no only do we lack the means to innovate, but the incentives as well.

*    *    *

In his column yesterday in the PDI, Cielito F. Habito answered a curious question, “Where is our growth coming from?” He posed this question to answer another, “How come we’re not feeling our growth?”

He emphasized three basic indicators that affect the common people — prices, jobs and income — and opined that of the three, the economy has been unable to provide more jobs despite the increase in growth. His conclusion was simple: that there is a disconnection between the sectors and regions that experience growth, and where the jobs are actually needed.

Sectoral mismatch
According to the data, agriculture accounts for 36.7 percent of our workers, or well over a third. Unfortunately, the farm sector contributed a measly 8.2 percent of the growth in the economy in the last quarter, or a mere 0.4 percentage point out of the 4.8 percent total growth posted by the economy. Meanwhile, the biggest sectoral contributors to growth were manufacturing and trading (wholesale and retail), each accounting for 1.1 percentage points or about 22.5 percent each of the growth. But manufacturing provides only 9.2 percent of the jobs in the economy, while trading accounts for 18.8 percent. In other words, the two sectors that account for close to half (45 percent) of the economy’s growth employ only about one-fourth (28 percent) of our workers. If we add transport, communication and storage (0.7 percentage points or 14.5 percent of the growth, 7.4 percent of labor force), then 60 percent of the growth is coming from sectors that provide only 35.4 percent of jobs. Little wonder, then, why the jobs were not forthcoming as much as they should, even with good growth numbers.

Geographic imbalance
What about the regional breakdown? The numbers show that the biggest contributor to the economy’s growth is–surprise, surprise–Metro Manila, accounting for 44.7 percent of the growth, or 2.3 percentage points out of the 4.8 percent GDP growth rate. A far second (8.6 percent of the growth) is Region 6 (Western Visayas), followed by Region 7 (Central Visayas), contributing 8.5 percent. Together, the three regions accounted for 61.8 percent of the economy’s growth–and yet account for only 29.2 percent of the jobs. If we look at Metro Manila and the surrounding provinces of Regions 3 and 4, they account for 61.2 percent of the growth, but only 38.7 percent of the jobs. The growth, in short, is not occurring where the jobs should be.

*    *    *

All this talk of turning points and economic corners has reminded me to catch up on a book I’ve been wanting to read, Malcolm Gladwell’s “The Tipping Point”. I’ll tell you what I think, as usual.


2 thoughts on “The turning point, and other thoughts on the Philippine economy

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