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Why is
the country unable to make any dent in licking poverty
despite government claims of an improved economy?
From the
vantage point of the Asian Development Bank (ADB), the
problem lies in two things:
one, low revenue collection; and two, rampant
corruption.
These
are actually interrelated. Low revenue collection is
partly the result of individuals and corporations not
paying taxes at all or not paying the right taxes to the
government. The thinking seems to be: Why pay taxes to
the government when the crooks within the bureaucracy
will only help themselves to the public treasury when no
one is looking?
The
corruption takes place when revenue collectors either
conspire with taxpayers so that only a percentage of the
amount due the government gets paid, if at all, or the
former will simply stuff their pockets with the tax take
through various forms of subterfuge. But that’s probably
only the tip of the iceberg, because the big bucks can
be made from kickbacks from overpricing of government
contracts.
Corruption leads to low revenue collection which, in
turn, limits the capability of the government to build
adequate public infrastructure and deliver vital social
services, such as education, health and housing.
The net
result? The perpetuation of mass poverty.
According to the ADB report “Critical Development
Constraints” released recently, the pace of poverty
reduction has been very slow and income inequality
remains high. Official data show that 26.9 percent of
families in 2006 lived below the official poverty
threshold, an increase from 24.4 percent in 2003. The
Philippines also holds the dubious distinction of
having, as of 2006, a Gini coefficient of per capita
income—a key measure of income inequality—of slightly
above 0.45, which is the highest among Southeast Asian
economies.
Among
the ADB’s main findings:
One, the
country’s fiscal situation remains tight despite some
progress made by the government in reducing the deficit
and to balance the budget this year. The reduction in
the fiscal deficit has been largely the result of deep
cuts in spending on social and economic services, and
the sale of government assets. The share of government
revenues as a proportion of gross domestic product (GDP)
is the lowest among major economies in East and
Southeast Asia.
Two,
while economic development has gained momentum in recent
years, with the economy in 2007 posting its highest
growth of 7.3 percent in the last three decades, both
public and private investments remain sluggish and their
share in GDP has continued to decline. This raises doubt
on whether current economic growth can be sustained.
And
three, poor governance underscores other critical
constraints.
Corruption undermines tax collection, reducing resources
for infrastructure development. At the same time,
political instability hinders investment and growth and
reduces the tax base.
So what
should be done to lessen poverty incidence and post
sustainable growth?
The
country’s fiscal situation should be sufficiently
improved so that the government can allocate more
resources to infrastructure investment. However, the ADB
emphasized that improved infrastructure alone will not
be enough to lower the cost of doing business and to
stimulate private investment. Better infrastructure, it
said, has to be accompanied by marked improvements in
investor confidence, “which can be done through the
government adequately addressing governance concerns by
implementing initiatives aimed at reducing corruption
and improving political stability.”
The
government must also address market failures, such as
information and “coordination externalities,” to
encourage investments that would diversify and expand
the manufacturing sector, exports and upgrade the
country’s level of technology.
For
growth to make an impact on poverty, the economy must
create productive employment opportunities that benefit
and reach all sections of society.
The
government should also support its development agenda by
broadening access to education, training and health
services, implementing more effective and better-funded
development programs at local levels and improving
social protection and disaster relief.
Removing
the most critical constraints and improving policies and
systems, the ADB suggests, will lead to the highest
returns for the country, as it will stimulate private
investments both from domestic and foreign sources
which, in turn, will lead to sustained and high growth
and create more employment opportunities. All of this
would ensure that the benefits of economic and social
development are shared by all.
The
Arroyo administration should take a close look at the
bank’s findings—obviously the product of an objective
reading of the situation—and put in place the necessary
remedial measures. |
