Entrepreneur magazine Philippines released a report on September 6 showing the industries where the 50 richest Filipinos make their income. Their numbers per sector are: real estate (27), food and beverage (21), utilities (20), financial services (19), leisure and hospitality (17), retail (16) and infrastructure (10). It is interesting to compare these figures to the actual engines of economic growth and sectoral employment composition.
First, in terms of GDP, manufacturing contributes the most, approximately 25 percent to total output. This is followed by wholesale and retail sector contributing 15 percent, followed by real estate 11 percent, transport 8 percent and finance 8 percent. Going into more detail in the GDP data, we find that the biggest contributor to manufacturing activities is actually food manufacturing. The apparent disconnect between the two data sets is that the richest are actually investing more in real estate, utilities and finance, among others; sectors that are relatively not open to foreign investors and industries that do not have long and intensive value chains. Second, in terms of employment, we processed data from the Labor Force Statistics in the last five years. Here, we find that the largest source of employment is the agricultural sector, with about 24 percent of total employed. This is followed by wholesale and retail trade, employing about 20 percent. Manufacturing and construction equally employ about 8 percent. The rest of the sectors employ less than 5 percent. In particular, finance employs about 1.2 percent and real estate only 0.45 percent.
Putting together all three data sets would clearly show gaps between investments of the rich, GDP and employment. The employment structure is still largely dominated by agriculture, a sector wherein few of the richest invest—maybe indirectly through inputs for the food manufacturing. Nonetheless, the Forbes magazine listing shows that in Thailand and Indonesia, the top richest people have significant investments in agriculture. Also, it is observable that there is a small percentage of jobs in the real-estate sector where most of them invest the most. Even if this is combined with the construction sector, their total share to jobs will still be less than 10 percent. This difference in investment and development directions is contributing to worsening the gap between the rich and the poor in the country. Although poverty had gone down to 21 percent in 2015, from about 25 percent in 2012, this does not mean that the poor are gaining in the current growth spurt of the country due to rising inequality.
The government is aware of these challenges. They have put in place a number of initiatives to take advantage of the share of manufacturing, which could help increase more jobs. The Department of Trade and Industry (DTI), in particular, had put in place a manufacturing resurgence program and through the Board of Investments, updated its Investment Priorities Plan. The National Competitiveness Council has institutionalized the Cities and Municipalities Competitiveness Initiative to improve local business competitiveness. This is basically improving the business climate to help entice the private sector to invest in these sectors where jobs are needed.
In addition, our being chair of Asean had put the small and medium enterprises (SMEs) in the center of our economic advocacy. Asean Integration should link our SMEs in our own local value chains into the regional value chains. Nonetheless, most of our local SMEs are behaving like our richest. Data from the DTI shows that bulk of SMEs are actually into wholesale and retail trade and accommodation and food services (combining for more than 60 percent) and manufacturing with about 13 percent. Most SMEs are in the services sectors, which are unlikely to create quality jobs leaving agriculture and manufacturing, which can actually help improve poverty better and, at the same time, improve inequality.
Thus, beyond government efforts, which still require more coordination and political will, there is also a need for the private sector to do its part. The data about where the richest are investing are informing us that not all economic activities require policy initiatives of the government. Those who are benefiting greatly from the growth spurt (not only the middle class) should take the initiative to directly participate in generating more jobs and shifting the structure of the economy. It might be best to reconsider how agriculture can be a private-sector initiative no longer waiting for government support. If the best and the most efficient resources can be channeled to improving the different subsectors of agriculture, then a large number of employed workers can see improvement in income and possibly create new initiatives for investments and training to happen. The work of foundations and civil society is limited in assisting these sectors, but if there is capital involved, there could be an opportunity to improve and narrow the inclusivity challenge. Futhermore, it would be beneficial if investments will lead to include value chains in agriculture and in light manufacturing that are accessible to SMEs.
The overseas Filipino workers and the business-process outsourcing workers have done their share in lifting the Philippine economy and moving the economic engine forward. The new initiative to sustain economic growth to new heights and in achieving middle-income status will require that those who have the capital put them into productive and job- creating pursuits in lagging and left-behind sectors.