Socioeconomic Planning Secretary, NEDA Director-General, and Chairperson, PIDS Board of Trustees

“Harnessing Institutions and Human Capital for Inclusive Growth”
PIDS’ 2015 Inaugural Public Policy Conference
Crowne Plaza Manila Galleria
22 September 2015

Dr. Gilbert Llanto, the management and staff of the Philippine Institute for Development Studies or PIDS, colleagues in the academe and government, representatives from civil society and international development community, members of the media, ladies and gentlemen, good morning.

It is my pleasure to join you in the inauguration of the PIDS’ first Annual Public Policy Conference. Today, through this inaugural conference, we celebrate public policy, which is a very challenging field. This event provides a platform to discuss the most pressing development issues that must be addressed in the immediate term, especially as we face the transition to a new government in less than a year’s time.

In particular, the theme of this conference, “Harnessing Our Institutions and Human Capital Development,” highlights the role of two elements that are crucial to achieving sustainable and inclusive growth—institutions and human capital.

As you may all know, the Philippines is one of the countries in the region and the world most invested in promoting inclusive growth and shared prosperity. Specifically, this administration’s development agenda for inclusive development is heavily anchored on good governance, sound economic policies, and prudent fiscal management. To be sure, the economic and governance reforms being proposed and implemented—especially efforts to build credible institutions and address long-term binding constraints to growth—are essentially geared toward ensuring that the country’s economic progress is felt by the majority of Filipinos.

The recent developments in the Philippine economy confirmed that good governance, a stable political climate, and macroeconomic stability are necessary for economic development. In particular, we need these in promoting a consistent, stable, and responsive environment conducive to business and investments. Over the last few years, we witnessed the stellar performance of our economy despite global uncertainties. Looking at the sources of growth during these years, we have reason to say that we are now traversing a higher growth trajectory.

However, we also recognize that the real measure of progress is improvement in the lives of our people. Thus, amid the country’s respectable economic gains, the persistent question is how we can sustain this growth in the long term and make it more inclusive. Specifically, how do we translate economic gains into faster poverty reduction and rapid expansion of high-quality employment opportunities that would benefit a greater number of our people?

Recent economic history—as we’ve learned from the experiences of our neighbors China, Thailand, Viet Nam, and Indonesia—suggests that sustaining gains in poverty reduction, job creation, and inclusive growth requires nothing less than robust structural transformation, where the economy shifts from low-productivity to high-productivity areas of activity. This typically involves rapid expansion of high-quality employment opportunities outside of agriculture.

In order to bring this about, we need to continue the implementation of business-friendly policy reforms and intensify our efforts that are more responsive to the needs of sectors and areas where many of the poor are found. This is for them to be able to contribute to, and benefit from, economic growth. At the same time, we must aggressively address remaining bottlenecks in physical capital formation and investments, which is crucial to the generation of high-quality jobs. Aggressive creation of employment opportunities fueled by high growth is the most direct and sustainable way to reduce poverty.

For this, allow me to highlight two priority areas to investment growth that we need to devote greater focus on: physical infrastructure and human capital development.

One of the major long-term binding constraints to our growth is the public infrastructure gap. Persistent infrastructure bottlenecks, particularly the delays in the completion of infrastructure and reconstruction projects as well as logistical bottlenecks, especially transport, threaten to hamper the pace of economic activity, if left unaddressed. Congestion in our roads, ports, airports, and seaports cost us billions of pesos per day and global rankings indicate that the quality of our infrastructure continues to lag behind our ASEAN counterparts. Therefore, the need for long-term solutions to the infrastructure gap remains critical and even more compelling. But while public infrastructure spending as a percent of GDP has been increasing in recent years, we also need to strengthen private sector participation in infrastructure development to keep up with rising demands in our fast-growing economy.

Another crucial component of inclusive growth is human capital development. This is particularly important as it is well-established that the most enabling instrument to lift people from poverty is through better education and health outcomes. In fact, the observed inability of the poor to benefit from growth can be traced to our underinvestment in human capital in the past. But in recent years, wider fiscal space accompanied by budget reforms, provided government with flexibility to increase human capital investments, particularly in education, health services, and social protection programs.

In fact, major programs have already taken flight to address critical issues of human capital formation in the country, especially among the poor. The country’s expanded Conditional Cash Transfer (CCT) Program called 4Ps—which has grown in budget by more than 500% since 2010 and now covers more than 4 million beneficiary households from only 630,000 in 2009—is already one of the largest in the world and has demonstrated early gains in improving outcomes for poor children, particularly in increasing enrolment and attendance in school. This initiative not only aims to combat intergenerational poverty but also targets to develop our human resources by widening access to basic education up to high school.

Moreover, the recently-instituted K to 12 Basic Education Program has also jumpstarted comprehensive reforms in the education sector in the hope of improving the competitiveness and capabilities of our future workforce and abating the skills mismatch in the labor market.

Nevertheless, human capital formation will only lead to inclusivity if the poor can benefit from recent growth. This is in the form of having suitable and stable employment once they enter the work force. For this reason, we must continuously identify and implement educational reforms, enhance workforce competencies, align education and training programs to respond to industry requirements, provide training programs to upgrade skills that can reduce job-worker mismatches, and further equalize opportunities.

At the same time, investments in technological innovation and research will prove to be crucial as these can be used as inputs into tangible and actionable policies for the country’s development.

But for all these to happen, we need public institutions that truly work. In this respect, human capital development will not only be for citizens and the labor force but also for those in government. The country needs high-performing and credible civil servants, led and supported by competent political leaders that uphold transparency and good governance, and support evidence-based policymaking. Continuous learning is important for public servants to be able to meet development challenges in a constantly changing environment.

It is in this regard that the PIDS, through this public conference, could contribute the greatest in furthering our goal of inclusive development: by providing a proactive forum to raise the level of public debate on the country’s development directions and to discuss issues that would inform the future leadership of critical policies toward our national goals.

This summit provides a great opportunity for all of us here to start more aggressive efforts to popularize policy research and information in development planning and policymaking. We call for your continued support, not just for this year but for the years ahead, to strengthen our collaborative efforts in pursuit of an inclusive and sustained growth.

I congratulate the PIDS for putting this conference together. I also acknowledge the participation of my esteemed colleagues in the academe and government.

And to all of you who took time to attend this conference, thank you and I wish for a productive conference ahead.