Manila: Growth has resumed but  term there is scant sign of the Philippines tackling the problems which have given it 30 years of feeble progress on social and economic fronts.

by Philip Bowring 

Manila: What ails the Philippines? The question is not a barb
aimed at President Estrada, in office for just one year. Nor
does it dispute that its economy came through the Asian crisis
and a severe drought with limited trauma and is now growing

But as the millennium draws to an end it is worth reflecting
just how little progress the Philippines has made over the
past 30 thirty years relative not only to its "Asian tiger"
neighbours but even compared to the un-glamerous economies of
south Asia. 

As they look ahead from the crisis to the factors which drive
longer term income growth, hard-headed economists see that at
best the country will get back to growth of around 4.5% a
year. That would be an improvement on the 3% annual average of
the past 30 years 1970-99 but would mean only modest real
income growth for a population still increasing at 2.3 % a
year. To raise it further would need a major increase in the
amount and efficiency of investment.

Over the years, there have been bursts of relative strength
when it seemed that the Philippines might match its neighours
-- the early Marcos martial law years and the middle Ramos
years, periods when government appeared coherent and foreign
capital flowed in. But the long term trend has been worse than
anywhere in Asia except Burma, North Korea and war-afflicted

Household incomes have actually been doing rather better than
the GDP numbers suggest, but only because of remittances now
running at $5 billion a year from migrants and overseas
workers. In the short run, remittances are a help. But loss of
many of the best and brightest Filipinos may be compounding
the underlying problem of a nation failing to exploit its
human potential.

Of course, GDP is not everything. The benefits of freedom of
speech and participation in elections and the general lack of
state interference by a weak state in the lives of individuals
cannot be measured. Filipinos have set an example of
retrieving democratic institutions and made more effort than
many neighbours at reducing income inequality.

But it is disturbing that social indicators too show the
nation to have fallen far. For example it now ranks just below
Indonesia and and Sri Lanka and far below Thailand and
Malaysia in the UNDP's Human Development Index, which includes
education levels, life expectancy etc. Back in 1960 it would
have been way ahead of all of them. So what has gone wrong for
a country which ought to have done as well as its open,
capitalist neighbours during three decades of east Asian
success? And what should be on Mr Estrada's agenda if he wants
to reverse Philippines' relative decline?

In no particular order, the following stand out:

* Population growth. Elsewhere, even in the subcontinent,
there has been a rapid decline in birth rates and dependency,
freeing up scarce capital for investment in better education,
infrastructure etc. For instance, population growth is
Thailand is now only 0.9% and in Indonesia 1.5%. These
declines did not need draconian, Chinese-style enforcement,
merely provision of contraception. In the Philippines,
fertility rates have been falling but very slowly as church
opposition has meant low priority for spending on family

* Lack of attention to agriculture. Everywhere else in Asia
rising farm productivity has been a necessary pre-condition
for industrialisation. One of the few benefits of the Marcos
era was a brief bout of spending on irrigation and price
incentives for farmers. But recent years have seen the sector
ignored. Many irrigation systems are in disrepair and rice
farm productivity lags far, far behind Indonesia. The
Philippines lacks the land for the more extensive agriculture
found in Thailand. Coconut farmers have been viciously
exploited, and the forests mostly destroyed, by urban interest
with political connections. Costs throughout agriculture are
high and efficiency low, and this helps explain why
manufacturing has also grown so slowly. 

* Unwillingness, particularly by business and the metropolitan
elite, to pay taxes which might damage their "southern
California plus multiple servants" lifestyle. Tax collection
did improve under Ramos but is till feeble. Most government
revenue goes go to pay operating expenses and debt interest,
leaving very little for roads, schools, dams, etc. Much
foreign aid lies unused because of lack of local funding, and
administrative incompetence. Privatisation has improved power
and telecoms, but lack of money is the major cause of the low
quality of secondary and technical education, and of physical
infrastructure generally.

* A nexus between business and politics which is bad for both.
State institutions and the bureaucracy are weak but the
influence of politicians in business decisions at central and
local levels is huge. "Booty Capitalism" is the apt title of a
recent study of banking in the Philippines, examining the
links between a patrimonial state and a predatory business
oligarchy extracting privileges while ensuring that the state
picks up the bill for failures. Ramos made an attempt to
increase competition, open markets and separate business and
government.  But while the pecking order of the oligarchs
changes, the system is more or less intact.

This is a rather gloomy outlook. Some of the problems are
deeply engrained in the social structure and political culture
of which President Estrada is a part. But others can be
addressed directly. Estrada has shown signs of willingness to
face down the church over family planning. If he can now face
down the oligarchs and apply the proceeds to agriculture,
roads and schools he may yet preside over better economic and
social statistics than his predecessors these past 30 years,
Marcos, Aquino and Ramos.




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