Just days ago, the Social Weather
Stations (SWS) survey found out that the number of unemployed Filipinos
increased in the last quarter of 2013 to a dismaying 12.1 million. The
unemployment rate rose to 27.5 percent as 2.5 million Filipinos joined the ranks
of the unemployed between September and December of last year. Coupled with a
poverty rate of 25.2 percent, these dismal statistics does not coincide with
the country’s second-highest growth rate of 7.2 percent in Asia, only after
economic giant China. Malacanang was quick to respond and reframed the issue
as a consequence of the havoc that Typhoon Yolanda wrecked in key regions of
the country. The Aquino administration simply cannot spin its way to escape
the fact that consistent relatively high growth in the past four years has
not been ‘inclusive’ or felt by the majority of Filipinos. It must be noted,
however, that the lag in poverty reduction in the Philippines cannot be
blamed in the current administration alone; the global political economy has played
the most significant role in shaping the structure of the Philippine state
and economy today. In the face of high growth and wide-scale poverty and
unemployment, an understanding of both the present and the past is crucial if
solutions will ever be found.
This essay explores the past and
present political economy of development in the Philippines, arguing that the
resilient continuity of past foreign policy has hampered development in the
country today. The first part of the essay will examine the service-led
growth of the Philippines and its implications for inclusive growth. The
second part will situate the Philippines in the larger political economy of
Southeast Asia as shaped by U.S. strategic and economic interest. The goal of
this essay is not to propose solutions to achieve the ever-elusive inclusive
growth, but to give a better understanding of the present and past factors
that continue to hamper inclusive growth and development in the Philippines.
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Deconstructing the 7.2
percent growth
In a press conference
announcing the annual performance of the Philippine economy in 2013, National
Economic and Development Authority (NEDA) secretary-general Arsenio Balisacan
reported that the driver of economic growth from the supply side has been the
services sector, contributing 3.6 percentage points to the real Gross Domestic
Product (GDP). He adds, “The 6.5 percent expansion of the services sector was
driven largely by the strong demand for communications, land and air
transportation, and storage and services incidental to transport.” Data shows
that from 1980-2009, the services sector has contributed an enormous 66.6
percent to GDP growth while industry contributes only 26.3 percent. In other
Southeast Asian countries, there has been more or less equal contributions from
both industry and services. Is there something dangerously wrong with the
Philippines’ disproportionately service-led growth?
In a paper published in 2012 entitled Taking the Right Road to
Inclusive Growth, the Asian Development Bank provides the answer.
Traditionally, industrialisation has been considered as the main driver in
economic growth at the early stages of development. In a nutshell, such a
development structure provides a high labour engagement and productivity in the
economy. A robust and productive manufacturing sector is able to absorb labor
from low productive sectors like agriculture. This increases job opportunities
available to numerous workers, giving them adequate incomes enough to lift
themselves out of poverty. Successful Asian countries have followed the
industrialization growth pattern, giving rise to what is admired all around the
world today as the Asian Tigers.
A service-led growth model is unconventional. The consumption of services is
only possible when people reach a certain level of income that is way above the
subsistence level. A service-oriented economic structure can thus be achieved
in advanced stages of development. The Philippines, as the statistics
aforementioned prove, has bypassed manufacturing for services as the main
driver of economic growth in the past thirty years. Such a development
strategy, however, has impactful implications on inclusive growth.
The services sector of the Philippines has been primarily steered by the
rapidly growing business process outsourcing (BPO). Growing at double-digit
rates, the Philippines is now the third largest BPO destination after India and
Canada. The continuously increasing export of services has led to 34.5 percent
employment in the BPO industry. On the surface, the BPO industry may appear to
be highly beneficial. However, a second look will show that it actually only
employs about 1.2 percent of the total labour force in the country. This is
largely due to the high qualification standards of BPO labour demand. In a
country where the poorest labourers received only have primary or secondary education, a
minimum qualification of a college degree will simply not match. A service-led
growth that is dependent on global demands and standards cannot reduce poverty
in a country where the necessary labour skills are not present.
To exacerbate the situation, the labour productivity growth within the
service industry in the Philippines has been underperforming. Inclusive growth
requires not only high employment, but mainly productive employment.
Further, the services sector has the lowest intersectoral link; it cannot
induce higher growth in other sectors. Comparatively, India is also a service
structured economy. The service sector contributes to about 61 percent of its
GDP growth in the past 30 years, highly similar to the Philippines. What sets
India apart from the Philippines is that it coupled its service-led growth with
an increase in productivity. However, even in India, slow poverty reduction is
still evident. The high-skilled labour demand of the service sector will simply
not provide enough job opportunities for a large number of Filipino labourers
with little to no skills.
The current service-led
growth model of the Philippines begets an important question—what hampered the
country’s industrialization phase?
The Political Economy of
Development in the Philippines
The development
pattern in Asia differs largely from that of the west. For one, Asia never saw an
independent capitalist class separating itself from the state to lead economic
development. The presence of strong colonial powers stunted the rise of the
western-like bourgeoisie; for hundreds of years, most of the economic activity
of countries in Asia, including the Philippines, remained to be centered on
agriculture. Bringing it closer to home, development in the Southeast Asian
region only began recently while already in the face of the global economic
order that western states were not in context of. Further, development in the
region was mainly brought about by United States’ strategic military interests
against communism at the height of the Cold War.
During that time, the U.S. needed to assert its presence in the Asian region
because the close proximity threat that communist states China and the Soviet
Union posed. If communism will prevail in the entire Asian region, the liberal
world order of the U.S. would have been in serious jeopardy. As a solution, the
U.S. strategy was to ensure the economic development of Asian states as a
counter attack to the pro-poor appeal of communism; the less poor people are,
the less the appeal of communism. The U.S. allied with its then
recently-independent former colony of Japan. To raise Japan to a viable
superpower ally, it needed to be economically rebuilt. Losing the communist
state of China as a trade partner for Japan, the U.S. triangulated trade
instead with the Southeast Asian region. Southeast Asian states were made to
play the role of a subsistence market; Japan imported raw materials from
Southeast Asia and exported manufactured goods back to them for consumption.
From a purely economic
perspective, the injection of Japanese capital or foreign direct investments
(FDI) into Southeast Asia provided the necessary boost that pushed most of
Southeast Asian countries' industrialisation phase. The Philippines, however,
had an overvalued currency at this crucial point in time; thus being
unattractive for Japanese capital to be invested in the country. This lag in
FDI still continues to be a crucial factor today as to why the Philippines is
constantly behind its neighbours. The Philippines is actually being surpassed
by communist states like Vietnam five-folds in attracting FDI. Because of such
low investment to GDP ratio, industrialisation and manufacturing in the
Philippines never really took root and continues to be a lag in inclusive
growth today.
From a wider perspective
of political economy, of all Southeast Asian states, it was the Philippines
that had a strong Spanish-American colonial legacy. During the Spanish colonial
period, families who cooperated with the Spanish colonisers in their divide and
rule strategy lorded over fellow Filipinos with vast amounts of land or haciendas granted
to them. These haciendas were incomparable in terms of size to
that of any other Southeast Asian country. American colonial policy further
exacerbated this by giving the landed oligarchs institutional access to the
state apparatus. Colonial policies are the origins of the Philippines’ unique
case of political dynastic rule today. As previously mentioned, an independent
capitalist class never emerged in Asia. In Taiwan, South Korea, and Hong Kong,
for example, it was a development from above model wherein the state fostered
capitalism from above. The communist threats these states were in close
proximity to, namely China and North Korea, forced the U.S. to adopt policies
that were suitable to economic development—manufacturing-led growth. In
contrast to the Philippines, the relatively weak communist threat never induced
U.S. policy to push for development in the country. Instead, it was of the
American interest to keep the Philippines centered on agriculture to supply the
American agricultural needs. Further, given that the agricultural sector is
controlled by landed oligarchs who were also politicians and statesmen, it was
but logical for them to keep an economic structure where they benefited from;
thus, they resisted any form of industrialisation from above that was
characteristic of successfully-developed Asian states.
Conclusion
In conclusion, I am
convinced that the value of the social sciences is not in its ability to offer
practical solutions to problems, but in providing the very explanatory frameworks
in which we problematise the world. The practical solutions are already
obvious; improve manufacturing, provide better technical education, enact
genuine land reform, etc. However, taking a step back to view the problem from
a larger political economy perspective will show the key roles of international
actors and their policies in hampering growth, more so an inclusive growth, in
the Philippines. While practical solutions may be enough at the national level,
a stronger form of accountability against the exploitative powers of advanced
states must be institutionalised in the global political order. It is the only
way that growth, in the global scale, will ever be inclusive.
Bibliography
Bibliography
Abrami, Regina, and Richard F. Doner. 2008.
"Southeast Asia and the political economy of development." In
Southeast Asia in political science , by Erik Martinez
Kuhonta, Dan Slater and Tuong Vu, 227-251. Stanford: Stanford University
Press.
Bello, Walden. 2009. The Anti-Development State.
Pasig City: Anvil Publishing, Inc.
McCoy, Alfred W. 2009. An Anarchy of Families:
State and Family in the Philippines. Madison City: University of
Wisconsin Press.
Usui, Norio. 2012. Taking the right road to
inclusive growth: industrial upgrading and diversification in the
Philippines. Ortigas City: Asian Development Bank.
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