REASONS WHY PHILIPPINES IS POOR, ACCORDING TO IMF

[PHOTO - Hating-Kapatid (Filipino for "sharing of siblings) By: Benson Galguerra]

 MANILA, DECEMBER 12, 2011 (STANDARD) by Roderick T. dela Cruz - WEAK government spending and political uncertainty are just some of the reasons why the Philippines has been outperformed by most of its Asian neighbors, a study sponsored by the International Monetary Fund showed.

The 25-page working paper, The Determinants of Economic Growth in the Philippines: A New Look, compared the Philippines to 23 emerging markets for the period 1965–2008 to analyze the factors behind per-capita GDP growth in the Philippines.

           A previous study noted that in the 1950s, the Philippines had the second highest per capita GDP in Asia. Today, its Southeast Asian neighbors Malaysia, Indonesia, Thailand, and Vietnam are described as high performing economies that are targetting first world statuses, while the Philippines was operating on a low-growth trajectory.

          “The Philippines’ mediocre performance in a number of indicators—particularly relative to its Asian counterparts—illuminates some of the existing pieces of the Philippine growth puzzle,” Willa Boots Tolo, author of the report and now a bank officer at the Philippines’ Bangko Sentral, said.

Among the factors blamed for the country’s weak economic performance were weak agricultural productivity, high government debt, low public, private, and foreign investment, weak research and development spending, low spending on education, lackluster tourism sector, relatively high income inequality, high corruption, strong population growth, more episodes of financial crisis, and political uncertainty.

             It suggested that the Philippines lacked a sustained period of relatively strong economic reforms.

Tolo said that, in order to catch up with its East Asian counterparts, the Philippines would need to maintain macroeconomic stability, expand its fiscal space, and redirect public spending to agriculture, infrastructure, and research and development.

            “Expansion of the fiscal space and thus scaling up spending on public investment requires raising tax revenue through both administrative and selective tax policy measures. This would include strengthening tax administration, reform in excise taxes, rationalization of fiscal incentives, and addressing exemptions in value-added taxation,” she said.

            The study said better irrigation, access to fertilizers, farm-to-market roads, and storage facilities could support development in the agricultural sector.

              The government’s focus on public-private partnerships for traditional and non-traditional infrastructure investments would also maximize the returns to development, while strengthening the focus of education on the sciences in all levels would encourage future researchers and scientists who would be instrumental in nation building.

http://www.newsflash.org/2004/02/be/be004450.htm

             The article in consideration tells about the major factors impeding the Philippines' progress towards first world status. Among the factors cited from the study "The Determinants of Economic Growth in the Philippines: A New Look" by Willa Boots Tolo, were weak government spending concerning research and development, agricultural productivity, and education. Prevalent government debt, corruption, political uncertainty, episodes of financial crises and strong population growth were also included. And in order to catch up with other fast growing East Asian countries, both authors of the report and news article are convinced that Philippines should maintain macroeconomic stability, redirect public expenditures towards those previously stated major factors, and expand its fiscal space.

            However, dissecting further the ideas presented within the article we could affirm if those mentioned above indeed describes the true nature of Philippines' slow growth. Among the problems listed, I would agree to those except for one, that strong population growth is a hindrance. For in my opinion, human resource is one most valuable resource a nation possesses. The aim therefore of our efforts must be raising the quality of life of individual Filipinos and consequently advancing our workforce. And improving the quality of life entails sufficient food production, and the backbone of our nation's production lies in our ability to tap our agricultural potential. If I may suggest, hand in hand with better irrigation, farm-to-market roads, and storage facilities, efforts must also be made to make better farmers. Because we cannot deny the fact that in our local context, our thoughts of farming and being a farmer are prejudiced. Farmers struggle to make their children professionals and unfortunately none of their children also wants to stay in the fields. Improving the life of these farmers and equipping them with modern machineries may, modern farming techniques may shift their view and in turn, boost our food production.  Courtesy of the law of supply and demand, prices of several commodities would lower down.

              Regarding financial crises and government spending, I would agree that expanding our fiscal space is one solution. Raising the tax revenues, implementing strict tax administration, and reform in excise taxes may avail us substantially. However, this may be ineffective if corruption would still prevail. I'm afraid regardless of our authorities' vigilance, the prevention of corruption among our government's ranks lies in our privilege of choosing our officials. On education, research and development, and technology, it is undeniable that we are at a setback. Students are ill-equipped with rooms, facilities, faculties, learning materials and encouragement. It is a long and rough road before our government can actually provide affordable and quality education for all, but granted that we boost our food production, a situation wherein most Filipinos do not anymore suffer hunger, then most of the population will be able to go to school and improve our over-all literacy rate. With many intellectuals, investment in research and development, as suggested in the article may very well return profits essential to our goal of attaining first world status.

            My opinions, especially some disagreements made within this blog, may have been brought about by my bias towards public policies that has direct impact to the commoner rather than those which affects enormous institutions and industries. It may have been also affected by my yet lack of deep rooted knowledge of economic policies. But I am confident that the ideas presented here throughout essentially intend to express my sympathy towards the slow growth of the Philippines' economy.