THE CHALLENGE OF INCLUSIVE GROWTH

The Philippines continues to impress the world with its outstanding economic performance. But do the poor benefit from it?

The Philippine economy is in bloom. In terms of gross domestic product (GDP), the basis of measuring a country’s total economic performance, the Philippines recorded an average growth rate of 6.3 percent from 2010 to 2013 to become the second fastest growing economy in Asia, next to China.  In 2014, the Philippines posted an annual GDP of 6.3 percent, mostly driven by the sectors of services, agriculture, manufacturing and construction. Indeed, the Philippines has transformed from the “Sick Man of Asia” to the region’s tiger economy, an outstanding accomplishment that the current administration takes pride in.

However, in spite of the impressive numbers, a huge portion of the population have yet to feel the positive impact of the economic progress.  According to a survey conducted by the Social Weather Stations in the last quarter of 2014, fifty-two percent (52%) of Filipino families (about 11.4 million households) perceive themselves as poor.  The study even noted that 2014, despite the slight improvement, was the worst in eight years in terms of self-rated poverty. Furthermore, the Philippine Statistics Authority reported that poverty incidence among Filipinos was at 25.8 percent in the first semester of 2014, up from 24.6 percent in the same period in 2013.

In the rural areas, the economic boost is barely felt by farmers like Eduardo Manango who operates a mango farm in Isabela. He complains that earnings went down, most probably also due to the attendant unpredictable weather pattern that negatively affects his yield. He added that farmers, especially the small ones, really experience difficulty in earning money beyond the harvest season.  “The income is only seasonal. This setting forces poor farmers to avail loans just to meet the needs of their farms and families. But this usually sinks them into debt,” said the 57 year old farmer.

Senator Paolo Benigno “Bam” Aquino IV believes that if the poverty rate in the country remains high despite the lofty economic growth figures, the Philippines can’t claim brimming economic success. “No one can deny that our growth is there, but the problem is that this is not an inclusive growth. Our economy is growing in leaps and bounds, but it is not getting where it needs to be,” he said. 

As elucidated by the World Bank, as it defined inclusive growth, “the pace and pattern of growth, which are interlinked and must be addressed together. Rapid pace of growth is unquestionably necessary for substantial poverty reduction, but for this growth to be sustainable in the long run, it should be broad-based across sectors, and inclusive of the large part of a country’s labor force. This definition implies a direct link between the macro and micro determinants of growth.”

Aquino, chairman of the Senate Committee on Trade, Commerce and Entrepreneurship, stated that the Philippine Government could bring the positive impact of the country’s economic growth to the poor communities and rural areas by encouraging them to get into business. “If we want to push for inclusive growth, we need to be able to energize the communities through real markets, through real businesses,” the legislator from Tarlac stated. However, he emphasized that providing livelihood training to people is not sufficient. The government should also help micro, small  and medium enterprises (MSMEs) sell their products properly by linking the communities with the markets.

To help the country realize inclusive growth, Aquino authored the Go Negosyo Act enacted by the Congress in 2014. The law seeks to speed-up the business registration process and boosts support for MSMEs. It also mandates every local government unit in the country to set up a Negosyo Center, under the supervision of the Department of Trade and Industry, where small business, farmers, producers and cooperatives could tap financial assistance and training. Negosyo Centers can also help MSMEs in developing marketing strategies.

Aquino cited the business partnership between Jollibee Foods Corporation (JFC), the largest food service company in the Philippines, and the KALASAG Farmers Producers Cooperative in Nueva Ecija as one of the best examples of the positive impact of linking communities and markets. JFC tapped the local farmers to supply up to 80 percent of onions requirements of their restaurant chain of more than 1,200 stores nationwide. Though Jollibee does not necessarily buy the onions at a higher price, the regularity of their business tie-up provided a stable source of income for around 200-300 farmers of KALASAG that eventually got them out of poverty. They were able to send their children to school, purchase motorcycles and improved their home structures. One of the onion growers who benefited from this eight-year project is Randy Dizon, 34, of Brgy. San Agustin. Dizon earned PhP150,000 from the 360 bags of onions harvested in 2010, as reported by the Alay sa Kaunlaran Inc. The success of the business partnership has improved not only the farmers’ lifestyle but also their self-esteem. “They now think of themselves as entrepreneurs, as business people, and that mindset is important to drive people out of poverty,” said Aquino.

To further help MSMEs, the Senator filed The Fair Competition Bill  which aims to prevent big companies from monopolizing the market to give a fair chance to MSMEs’ businesses to prosper. “If a large company, because of its market dominance, is edging an MSME out, the latter can file a complaint and the former can be fined and in some cases, may even be criminally charged. It is a powerful bill,” said Aquino. As of this writing, The Fair Competition Bill is on its third reading in the Senate,  while awaiting its passage in the House of Representatives.

For Senator Aquino, attaining inclusive growth is more of a moral imperative than an economic challenge wherein the government needs to work hand in hand with the private sector to bring down poverty rate and enabling the underprivileged enjoy benefits of economic growth. “It’s a huge thing that the market, as represented by the private sector, is engaged in getting our country out of poverty,” he expressed.

In the same light, the youngest senator believes that service organizations like Rotary, through its diverse membership composed of businessmen and professionals dedicated to service, could play a crucial role in promoting inclusive growth in the country.  He encourages Rotarian businessmen to engage their companies in providing long-term livelihood support to poor communities. “You don’t have to be a top 100 company like Jollibee or Nestle. You can actually look at your own company’s activities and identify which of these could be venues for community services.”

 Art by: Carmen Dela Cerna

Published in: April 2014 Philippine Rotary magazine