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Solving Philippines' unemployment

Publication Date : 18-02-2014

 

It is saddening that despite the rapid economic expansion for the past two years, millions of Filipinos remain unemployed. This is what economists refer to as “jobless growth”, a phenomenon that afflicts many developing countries, debunking the myth that economic growth automatically translates to employment and poverty reduction.

Halfway into his six-year term, Philippine President Benigno Aquino III last week challenged his Cabinet to come up with an action plan for poverty reduction, mainly through job generation. He presided over a rare full-Cabinet meeting after a Social Weather Stations survey showed that the unemployment rate in 2013 had worsened to 27.5 per cent, equivalent to an estimated 12.1 million, as 2.5 million Filipinos joined the ranks of the jobless between September and December. And yet the economy expanded by 7.2 per cent, the second-fastest in Asia after China’s.

There are several proposals to address unemployment, but sadly, there are no short-term ones. These measures are well known to the Aquino administration and its predecessors. These involve structural reforms that will make it conducive for investors to put money in factories and brick-and-mortar industries. Only recently, the Asian Development Bank, in a publication titled “Taking the Right Road to Inclusive Growth”, reiterated that the Philippines’ failure to boost its industrial sector was a key reason its economic growth remained far from being inclusive.

“The Philippine economy’s chronic problems of high unemployment, slow poverty reduction and low investment are reflections of the sluggish industrialisation,” the ADB said, pointing out that it is the industrial sector, which includes manufacturing, that should drive the economy to substantially reduce unemployment and poverty.

Economic growth during the past years had been fuelled by the service sector, mainly the business process outsourcing industry. According to the ADB, the industrial sector, compared with the service sector, has the better ability to create more job opportunities for the poor and a much higher multiplier effect on the economy. The ADB suggested more government support for the industrial sector through investments in education, skills training and infrastructure to achieve inclusive economic growth.

In June 2013, Albay Gov. Joey Salceda, an economist before becoming a politician, had a mouthful to say about the buzz phrase “inclusive growth”. He suggested that the government invest in the countryside to address the high unemployment rate, warning that “social injustice is very much stubborn and structural, historically persistent and policy-immune”, as evidenced by the huge job losses despite the country’s stellar economic growth.

Saying that the economy’s problems had been “overstudied and overdiscussed but undersolved,” Salceda called on the government to shift the focus of its investments strategy from Metro Manila to the countryside. “Go for low-lying fruits, or where the growth is easy because the base is lower—and where else but the countryside? How far can we squeeze growth out of the National Capital Region when in fact the solution is decongestion?” he said, lamenting that private investments were concentrated on the property sector, which he labeled as an industry only of the rich.

The agriculture sector is a very good example of where investments should go. Why should we content ourselves with just producing and exporting raw copra or bananas, or the fresh catch from our seas? The government must make it conducive for investors to put money in factories and manufacturing facilities to bring the agricultural sector a step higher—processed agricultural products. Our farmers and fishers need not forever be farmers and fishers; they must upgrade to become processed-coconut producers or canned-fish manufacturers.

We are not lacking in solutions to the worsening unemployment problem. The private sector, not the government, is the engine of economic growth. However, our investment climate is such that prospective investors are either turned off by bureaucratic red tape or stymied by regulatory restrictions. We need only political will on the part of the government to build roads, sea and air ports and other infrastructure, and remove restrictions to the flow of local and foreign investments, and for the private sector to do its part by investing in job-creating activities, particularly in the countryside.

 

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