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Why the Philippines is poor

First Posted 08:05:00 02/03/2010

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In our group was circulated an e-mail article on why the Philippines is poor. The main reason cited was our poor attitude as a people. This I do not have much disagreement with when we refer to individuals. An individual with a positive attitude could surely do well in many ways in every endeavor in life. It is different, however, when we talk of the nation as a whole because together we can take a different personality, which can also feedback into how each of us would act individually. In a dysfunctional society, one can become a cynic easily.

In trying to fathom why we are poor I went back to reading again an Asian Development Bank study ?Philippines: Critical Development Constraints?, published December 2007, which I like more particularly for its wealth of data showing how we perform compared with our neighbors over the years.

My reading of the study and its statistics, more or less, shows that our historically high consumption rates, and consequently, our low investment rates, along with our negative net exports is what is causing our GDP to grow at a much slower pace than our neighbors, causing our per capita income to remain low and place many of our people in poverty.

We can add to this our failure to industrialize as evidenced by the low percentage share of industry to our GDP. Under this condition, many of our people remain in agriculture or move to the service sector. Both are low-paying, however, compared with the industry sector, hence, the continued poverty of a sizeable segment of our population.

Add further our rapid population growth and that explains why poverty is hard to eradicate. This is because rapid population growth entails more cost initially per family to feed their children. This means also that at the family level, there is very little savings or little money left for education of children. At the national level, of course, this means less money for investments. Less investments means jobs are scarce so that when poor children with very little education finally join the labor force when they come of age, they find themselves unemployed or forced to take refuge in the informal sector with income that barely covers the need for subsistence.

On why we failed to industrialize, the reason I see lies in our highly protective if not outright wrong economic policies in the past. As done in many other countries, it was right for us after the last World War to go into import substitution to start our industrialization by protecting our newly established import- substituting infant industries. What was wrong was our failure to follow that up with export industrialization. In Korea, the government makes it a condition for a protected firm to go into exports after a number of years. Here, because of continued protection which makes their operation very profitable, firms are not enticed to go into export on their own and the government did not do much about it because they also became captives of the rich and highly influential people in business. Look at who are financing much of the expenditures of our presidential candidates.

It is said that a country need not industrialize anymore to develop because it can just leapfrog to the fast-growing service industry. We are actually doing that but what kind of service industries do we have? They are mostly of the manual-work type that pays less to their workers - ?salesgirls, waiters, masseurs, etc, including those in tourism-related industries. Of course, it helps solve part of our unemployment problem but if we have to raise the level of income of our people and lift them out of poverty, we should now go into high-paying service activities that use more of our brain rather than our two hands.

We should not also forget that industrialization does not mean going only into brick-and-mortar-type heavy industries. So many industries are now high-tech and light or small or medium scale, which depend largely on brainpower rather than muscles to run.

Finally, we may not have enough local savings to finance our massive needs for investments but if we can create the right atmosphere, funds from outside will not hesitate to come. The right atmosphere of course means the presence of world-class infrastructure, an efficient and honest bureaucracy, a highly trained/educated and healthy labor force, and government economic policies that are consistent all the way and business-friendly.

Our neighbors did all these things and are up there in terms of per capita GDP ranking. As former president Fidel Ramos said in his Philippines 2000 Plan, we already know the basic requirements of development and what remains is for us to do what is necessary.

That surely begins with a good leader sitting in Malacañang to give us the direction and strategy to follow until we reach our objective.

In our present set of candidates for President, do we have that guy? Just asking.

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