Inclusive Economic Growth to Rid Poverty

In the Philippines, development initiatives began in 1982 as domestic government administrations and the international community assisted in efforts to build local infrastructure projects. By the 1990s, private sector actors became increasingly important after an endorsement by the Filipino government, stimulating an increase in the number of privately-owned micro-enterprises. Small and medium sized companies, too, have since promoted development investments, and aided economic growth in the country.

Still, despite all these efforts, more poor and lower-skilled workers fell below the poverty line since the launch of the poverty reduction initiatives. This post takes a closer looks at the Philippine poverty dilemma, summarizing the conclusions drawn from the Asian Development Bank’s Philippines Case Study and the World Bank’s Philippines Quarterly.

According to the Asian Development Bank’s Philippines: Case Studies on Private Sector Development and Operations, by 2003 the Philippines private sector had committed to “45 power related projects, 20 transport projects, 17 environment related projects, and some 49 other projects related to property development and information technology.” The government efforts to allow private sector growth and expand infrastructural investments increased GDP, but failed to incorporate public policies to ensure that those of a lower socio-economic status would benefit from the GDP growth rates.

A similar story emerges from the International Development Research Centre’s 2005 publication Development takes on a new face and challenge in the Philippines, scholars Michelle Hibler (International Development Research Centre) and Ceclia Reyes (Community Based Monitoring System) note that, “the performance of the Philippines with respect to poverty reduction to be very modest. While the incidence of poverty has declined over the past 15 years, the number of poor has actually increased.”

Last month, the Philippines Quarterly Report (published by the World Bank in June 2011) reiterated their concern of failed poverty reduction efforts. The report notes that although the domestic economy was able to bounce back from the recession with an economic expansion of 4.9% in early 2011, poverty actually increased from 2003 to 2009, with the percentage of the population falling below the poverty line increasing from 24.9% to 26.5%.

So why has this happened? The World Bank suggests that the government’s lack of economic inclusivity has posed a major challenge to the effort to reduce poverty. Furthermore, additional findings by the World Bank show that the failures of poverty reduction also stems from the lack of government policies to provide integrative programs to reduce poverty.  Although the efforts of the private sector have stimulated growth, the Filipino government policies have prevented the poor from sharing in the wealth.

In June 2011, the World Bank suggested that an inclusive development policy to improve the conditions of the poor could be achieved through a two-pronged approach:

  • According to the World Bank, the government of the Philippines should ensure the inclusion of low and semi-skilled laborers in the market. By allowing the free market to incorporate the informal labor sector, lower-skilled worker wages would increase and standards of living would rise. The government should adopt a more liberal labor policy that would help enhance the income-earning potential and increase wages of the lower labor markets.
  • Furthermore, the government should enact welfare reforms to ensure that the poorest population gain access to basic needs such as education, healthcare, and social protection services. If the government were to reform its welfare policies and prevent inter-generational poverty by assisting the children of the poor, efforts to decrease poverty would be more effective.

Currently, the Philippine’s Aquino administration (2011) has begun to make reforms to improve economic and social conditions.  The new reform initiatives include increasing the transparency of the public budget, the launch of the Public-Private Partnership Program to aid inclusive development initiatives, and the expansion of the (Pantawid Pamilyang Pilipino Program) 4P conditional cash transfer program to cover 60% of the poor. Hopefully, the Philippine government will continue to work in tandem with the private sector to promote higher-paying jobs and lower poverty rates.

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