The Gardener visits the government’s claim of inclusive growth.
Every year around this time even gardeners get caught up
in the government-initiated game of numbers, a peculiar lens
of the national camera that always becomes controversial in the blurred images it projects.
What is inclusive growth?
In the Philippine Development Plan 2011 to 2016, the Philippine government puts its official dream in clear terms. The very first chapter of this NEDA (National Economic Development Authority) obra maestra sets out “In Pursuit of Inclusive Growth. ”
What does it mean? It is supposed to be the opposite of trickle-down theories or jobless growth.
“Inclusive growth means, first of all, growth that is rapid enough to matter, given the country’s large population, geographical differences, and social complexity.
“It is [a] sustained growth that creates jobs, draws the majority into the economic and social mainstream, and continuously reduces mass poverty.
“This is an ideal which the country has perennially fallen short of, and this failure has had the most far-reaching consequences, from mass misery and marginalization, to an overseas exodus of skill and talent, to political disaffection and alienation, leading finally to threats to the constitution of the state itself.”
Thus it was with joy for the new NEDA chief to announce around the time of the lynching of Chief Justice Corona that the Philippines had finally more than caught up in economic growth with the rest of the ASEAN countries.
The National Statistical Coordination Board (NSCB) reported that the country’s GDP grew by 6.4 percent in the first quarter from the revised four percent in the fourth quarter of last year.
This strong growth in the first quarter could easily be attributed firstly to robust domestic demand financed by OFW remittances; secondly, to a rebound in exports prior to our border quarrels with China; and, thirdly, higher government spending in infrastructure projects all over the various congressional districts of the country funded by a House of representatives that was totally in synch with the desires of Malacanan.
NEDA DG, Sec. Arsenio Balisacan
In fact, NEDA’s new Director-General, Secretary Arsenio Balisacan, already said that this growth will be sustained — due to the start of election spending very soon for the 2013 election. So, this early the chief economic planner of the Republic is looking to nothing more than an election-led economic growth. Long live Philippine elections!
We have to note that possible growth in the real economy of agriculture and industry has almost nothing to do with the higher growth rate now often discussed. Those two areas of the national economy are simply not experiencing any significant rise. Hence, the reasons why many analysts easily believed that growth was not yet approaching “inclusive” character; in other words, with minimal growth in agriculture and industry comes the credibly continuing danger of jobless growth.
DBM Sec. Florencio Abad
But the Cabinet-level Development Budget Coordination Committee (DBCC) already had visions of the country’s GDP growing at a faster rate of five to six percent after slackening to four percent last year from 7.6 percent in 2010, With the latest news, Budget and Management Secretary Florencio Abad quite predictably identified “the real reasons” for optimism as “good governance, a dedicated reform program and sound management.”
As quick on the draw, however, against Abad’s “Good morning myself!” was critic Teddy Boy Locsin, who soberly twittered “no president gets credit for the economy until the fourth year.” One Mr. Ben Kritz commented: “Mr. Locsin is essentially correct; the inertia from the previous administration in general has an effect from two to four years into the next term, and likewise, economic moves within the current term can take two to four years to have a comprehensive impact on the entire country.” Butch, Teddy Boy…whaaatever, as the young folk say.
The Song, not the Singer
The over-all experience our nation has had so far is that all administrations only want to hear good news and take credit and feel good. Whether people actually feel economic pain or gain is most often irrelevant.
Take this most recent case of joblessness in the country hitting a new high, according to no less than the administration-friendly SWS or Social Weather Stations. More than four million one hundred thousand Filipinos joined the ranks of the unemployed between December 2011 and March 2012, raising the unemployment rate to 34.4 percent or an estimated 13.8 million individuals.
The First Quarter 2012 Social Weather Survey, conducted from March 10 to 13, showed that unemployment rose ten points from the 24 percent, or an estimated 9.7 million people, recorded in December. The survey accepts an error margin of plus-or-minus three percentage points. What is not good to administration ears is that this recent figure surpassed the previous record of 34.2 percent posted in February 2009 during the Arroyo administration. But who among the common tao cares? They would not necessarily take it against PNoy; they may rather pray that he would just do better.
According to SWS, their figure included those who were retrenched (13 percent), resigned from their jobs (15 percent) or joined the throngs of job-seekers for the first time (six percent).
The SWS also noted that unemployment was higher among women (43 percent in March from 35.6 percent in December 2011) than among men (27.6 percent in March from 15.2 percent in December 2011), and also higher among the younger members of the labor force: 55.9 percent among respondents aged 18 to 24; 45.4 percent among respondents 24 to 34; 21.7 percent among those in the 35 to 44 age range, and 30.8 percent among those at least 45 years old.
Labor Sec. Baldoz
Despite the friendly singer, the government’s Labor Secretary immediately labeled the SWS song a bit out of tune. The right note, according to Labor Secretary Rosalinda Baldoz, is that the labor market even “performed better” during the first quarter of 2012 with the number of employed Filipinos increasing by 1.1 million based on the Labor Force Survey (LFS) officially conducted by the government in January 2012.
So, how explain the differences of figures? Baldoz said that historically SWS survey results on unemployment were higher than the LFS results. “For one, the methodologies of the two surveys are different. The SWS has a respondent coverage of 1,200, aged 18 years old and above, while the LFS has a respondent coverage of persons 15 years old and above in 51,000 households,” she said.
“For 2012, the country’s labor market performed better as the employment level grew by 3 percent with total employed persons increasing to 37.394 million from the 36.293 million in 2011,” Baldoz said. “In absolute terms, however, the total number of unemployed persons would only reach 2.922 million,” she said. “While it is true that unemployment is high among the 15-24 age bracket, the fact was that youth unemployment decreased from 17.2 percent last year to 16.6 percent, or 1.430 million,” Baldoz said. “Among men, [the] unemployment rate remained unchanged at 63.5 percent or 1.855 million, while the rate for women declined to 6.8 percent or 1.067 million from 7.2 percent or 1.089 million in 2011,” she said. Come again, ma’am, your performance is so loud that I can’t hear your numbers!
Demystifying GDP
That guy, Mr. Ben Kritz, whom we came across earlier responding to the Locsin Twitter, is exasperatingly pertinacious in going to the heart of the GDP matter. He says the problem of our passion for the GDP figure is that we go more for the merely nominal rather than the real GDP.
In measuring the nation’s economic output, said Kritz, the method used by the Philippines is the expenditure approach, which adds the total consumption, investments, government purchases, and exports to arrive at a total GDP. But calculating GDP merely according to current prices can only yield a nominal GDP. It does not take into account price inflation or the increase in population both of which factors cause an increase in nominal GDP, but do not necessarily reflect a true increase in economic output.
According to him, if we factor in those two – price inflation and population increase – the actual GDP growth in the 1st quarter of 2012 would be a moderate 4.31%, not 6.4% — still remarkably better than the previous quarter, but …well, this must be why many people are not feeling the economic gain the Administration is quick to take credit for, because in real terms, there isn’t one.
ECOP Concerns
ECOP or the Employers’ Confederation of the Philippines through its President, Edgardo B. Lacson, puts it rather bluntly: “We have been on a ‘jobless growth’ since 2008.” And the line was not meant to be an Arroyo-vs-Aquino statement either.
According to Lacson, the growth in new labor entrants has always been higher than growth in jobs generation since 2008, when GDP rates had been relatively robust.
ECOP data showed 593,000 new labor force entrants in 2008 but there were only 530,000 jobs created for that year. In 2009 additional labor entrants of 1.013 million were registered as against 986,000 jobs creation in that year. In 2010, new labor entrants were recorded at 1.001 million while jobs creation was at 974,000. There were also 1.156 million new entrants in 2011 as against jobs generation of 1.112 million.
The discrepancy in new jobs creation did not yet consider the existing unemployment rate. The government, has already changed the definition of underemployment paving the way for the inclusion of even those not fully employed as employed thus, overstating the number of people employed, making the unemployment rate lower, according to ECOP.
“But for all intents and purposes, an underemployed person should be counted as unemployed. This means, there are 10 million unemployed Filipinos and not 2 million,” Lacson pointed out.
Is not the business processing outsourcing sector absorbing enough of our young labor force? ECOP says No. In BPO, as the old tune said, we may be “the best” but we are not the only one. India has not moved out of this sector, for example. On the contrary, in fact, India has vowed to further enhance its BPO industry.
What about other sectors like the manufacturing sector? ECOP says factory owners are going into automation and are reducing their number of workers. Besides, he said, fewer manufacturing firms have set up shops in the country with the onset of trade globalization as cheaper imports are coming in to the detriment of local industries, which could not compete globally.
The ‘Dutch Disease’
Quite similar to ECOP’s concern is that expressed by FAME or the Federated Association of Manpower Exporters through Lito Soriano, its Executive Director.
Soriano
Soriano said it was The Economist that coined the term ‘The Dutch Disease’ way back when. It is a concept that purportedly explains the apparent relationship between the increase in exploitation of natural resources and a decline in the manufacturing sector. The theory is that an increase in revenues from natural resources will de-industrialize a nation’s economy by raising the exchange rate, which makes the manufacturing sector less competitive.
The concept has since been applied to other types of economic models. In the case of the Philippines, the easy increase in revenues has been identified as coming from the OFW remittances.
For instance, a strong peso fueled by OFW money may tend to punish industries selling to both the domestic market and abroad because their costs were much higher than those from countries not suffering from this ‘Dutch disease.’
It is ironic that FAME the recruiter would be the most concerned about this phenomenon. In another sense, however, it is understandable as their concern because the decimation of both the domestic industries and export industries has depleted the manpower pool for highly skilled and professional workers that are in the high-end of the deployment industry.
Lastly, advice from a Nobel Laureate
Stiglitz
The Nobel Prize-wining economist, Professor Joseph E. Stiglitz, would remind us quite simply that things are not always what they seem. He said: “A country that gives away its natural resources will see gross domestic product rise, but gross national product – which focuses on income earned by those inside a country as opposed to what is produced inside a country — may not rise much, since the value of what is produced accrues to foreigners.”
He has urged national economic managers looking for an alternative accounting framework to supplement the use of GDP with a new measure: green net national product. Gardeners around the world welcome this. “The ‘green’ means that GDP must be reduced to take into account the depletion of natural resources and the degradation of the environment – just as a company must depreciate both its tangible and intangible assets. ‘Net’ national product (NNP) means that there has to be an adjustment for the depreciation of the country’s physical assets.”
The Nobel Prize winner is saying that GDP, long the standard scorecard for any national economy, has become deficient as a measure of long-term economic health in our resource-driven, globalizing world.
The prime example given by Stiglitz of the trouble with mere GDP calculations is a gold and copper mine. Countries like the Philippines consider the opening of such a mine a national victory. No doubt, the value of the extracted ore will show up in the country’s GDP, but – Stiglitz reminds us – one must not be blind to the fact that almost all income from the mine went to its foreign owners.
Worse still, the mine would surely inflict huge environmental damage. Its operators will discharge millions of tons of tailings into the local water systems, polluting the main source of livelihood for tens of thousands of people living in scores of villages downstream.
The mine company may be sued and settle for millions of dollars, but in the end the burden of much of the environmental repair, if still possible, is left to the careless country that did not have the foresight to determine what is real gain and what is loss. “Bad accounting frameworks are likely to lead to bad decisions. A government focused on GDP might be encouraged to give away mining or oil concessions; a focus on green NNP might make it realize that the country risks being worse off.”
FINIS
Charles Avila -The Gardener
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