DESPITE the economy’s recent success, the Philippines continues to suffer from narrow, shallow and hollow growth, according to a former socioeconomic planning secretary.
Cielito Habito, a professor of Economics at the Ateneo de Manila University, said this is the reason high inequality persists in the country.
“Richest 1 percent of Filipinos control 60-percent of GDP [gross domestic product],” Habito said. “[The] income of [the] richest 20 percent is 8.4 times that of [the] poorest 20 percent versus Thailand [6.9 percent]; Vietnam [6 percent]; and Sri Lanka [5.8 percent].”
Narrow growth, Habito explained, is the kind of growth that is driven by a few high-growth sectors, such as business-process outsourcing, finance and real estate.
Shallow growth, on the other hand, refers to growth where the bulk of exports come from low domestic value- added sectors that have little or no linkage to the rest of the economy.
Habito said hollow growth refers to jobless growth. This happens when job generation remains low amid high or unprecedented economic success.
The economist said that the only way to resolve this is through the five pillars of inclusive growth—small enterprise development; competition policy; asset reform; sectoral drivers of inclusive growth; and human
development through better health and high education.
While all these are important, Habito stressed that micro, small and medium enterprises (MSMEs) growth and development can already be the cornerstone of the next administration’s economic program.
Developing MSMEs include expanding their access to financing, as well as strengthening technology assistance through public research and development and shared services.
This also includes fostering the clustering of MSMEs and encouraging “coopetition” among them, as well as improving market access.
“Because of the need for economies of scale to be able to engage in the export markets, the inclusive value chain is being practiced by certain big businesses that deliberately choose to source their inputs from small producers,” Habito said.
“Therefore, you also have a good reason for small enterprises, the small producers to be strengthened symbiotically with large businesses,” he added.
Competition policy, on the other hand, has recently become a law in the Philippines, or the Philippine Competition Act (Republic Act 10667).
Under the new law, the government will create a Competition Commission to address and/or curb abuse of dominance; mergers and acquisitions; state- entry barriers; regulatory conflict of interest; and leveling the playing field among large enterprises and MSMEs.
Asset reform, on the other hand, pertains to equal opportunities through legislation, such as the Comprehensive Agrarian Reform Program and the Fisheries Code.
Habito also said sector or industry inclusive growth drivers aim to benefit other industries in the economy through backward and forward linkages, as well as generate more employment. These industries are tourism and allied industries; agriculture and agribusiness; and manufacturing.
Further, human development, Habito said, includes educating existing entrepreneurs or those aspiring to own a business someday.
The government, Habito added, should change the mindset of graduates to not simply be an employee and earn a wage but create jobs and wealth.