By ARSENIO M. BALISACAN
Secretary of Socioeconomic Planning
Marriott Hotel, Pasay City
24 May 2013
Thank you for the invitation. I was informed that you have asked NEDA in 2011, to present the Philippines’ overall development framework for inclusive growth. Today, I am pleased to present to you the progress our country has achieved for the past two years and the directions and priorities moving forward towards the achievement of rapid, sustained and inclusive growth.
The Philippine Development Plan (PDP) 2011-2016 has set the following major targets to be achieved by the end of the plan period: GDP growth rate of 7-8% and investment to GDP ratio of 22% as indicators of rapid growth; low and stable inflation within the 3-5% band as indicator of sustained growth; unemployment rate of about 7% and poverty incidence of about 17% as indicators of inclusive growth.
We are confident that with the 2012 GDP growth rate of 6.6%, we are on track to achieving our target of 6-7% this year and 6.5-7.5% next year. Investment to GDP ratio in 2012 was 20.4%. A significant portion of this is public investments, which increased by more than 32%. Inflation rate was kept low and stable, even settling at the lower end of our target. There are other indicators that demonstrate that we have managed our economy quite well. And perhaps the best evidence is our first ever investment grade rating granted by the two major credit rating agencies – Fitch and Standard & Poors.
The big challenge in all these is to reduce unemployment and poverty incidence. Let me clarify, though, that reduced unemployment in 2012 of 7.0% is already within the target set out in the Plan. Moreover, the quality of employment, as indicated by the proportion of workers in the wage and salary classification, has improved. In 2010, only 54% of workers were in this classification; this increased to 57% in 2012 and to 60% in January 2013. Despite these seemingly good numbers in employment, poverty remains high even with the slight decline. Hence, we intend to revise the employment targets, particularly paying attention to the creation of decent and remunerative jobs to make it more consistent with the goal of inclusive growth. After all, inclusive growth means that a lot more participate in the growth process (at the very least, those wanting to work should find work) and that everyone benefits from it (those working should earn decent returns and even those not able to work should be able to enjoy the minimum basic needs).
As I speak before you, the Philippine Development Plan is being updated. We are taking stock of the lessons learned these past three years. We are also trying to anticipate future developments especially in the rest of the world, and what these would mean for the Philippines. Our aim is to refine our strategic framework to achieve the goal of rapid, sustained and inclusive growth. This framework takes advantage of the opportunities presented by recent and possible future developments and prepares for possible threats.
Lest I be misconstrued, it should be noted that, every year, each agency of government comes up with a workplan and a corresponding budget. The PDP updating, meanwhile, forces each agency to frame its workplan – its outcomes and outputs – in the next three years towards achieving our goal of rapid and sustained and inclusive growth. The process also provides a venue for agencies and stakeholders involved in a sector to come together and draw up a strategic framework that will ensure coherence, effectiveness and efficiency of policies, programs and projects.
The PDP midterm update will address the two major challenges of inclusive growth: create massive jobs and substantially reduce poverty.
Creating jobs to reduce unemployment requires a multi-pronged multi-stakeholder approach. More importantly, the strategy should be anchored on a distinct appreciation of the unemployment problem.
Looking at the data, we have broken down the unemployment problem into three types – (1) the slow rate of increase of employment opportunities, (2) low employability of new job entrants, and (3) slow recovery of firms and businesses that have been affected by calamities.
Addressing the first problem, the slow rate of increase of employment opportunities, requires nothing less than rapid, sustained investment growth, both from the public and private sectors. We aim to achor public investment to areas and programs that would improve the investment climate for private investors. Our strategic framework envisions the public sector as provider of enabling conditions for the private sector to invest in productive sectors, thereby creating decent and remenurative employment opportunities for the rapidly growing labor force.
High and sustained investment growth will, of course, mean rapid and sustained economic growth. We will, as I noted earlier, maintain our target growth path of 6-7% in 2013 and increasing to 7-8% by 2016.
Macroeconomic stability will still be the major strategy to fuel positive expectations. Government will continue to exercise fiscal prudence. We will strive to maintain, if not improve, our credit ratings so that business and employers could enjoy a lower cost of capital.
Government will continue to assist in expanding markets. ASEAN 2015 is just around the corner and in preparation, the DTI has been conducting seminars on Doing Business in Free Trade Areas. We have also been aggressively attracting tourists into the country. These tourists are like export markets already coming into our shores. Another avenue that can be used to tap foreign markets is through Overseas Filipinos.
To boost the competitiveness of our productive sectors, we are investing heavily in infrastructure, human capital (particularly in basic education and health), and governance. Admittedly, in infrastructure development, especially those involving public-private partnerships, the pace of implementation has been slower than desired. We expect to see faster implementation of the key infrastructure programs in the remaining years of this administration. The Aquino Administration is strongly committed to building a strong foundation for a competitive economy.
We are also proposing measures to encourage innovations for we know that this is the only way to sustain growth. A major part of the R&D work would still be initiated by government. But we hope that the private sector would increase their R&D efforts as well.
Investments in human capital will also address the problem of low employability among new job entrants. The President has recently signed into law the K+12 program. Apart from adding two more years of education, the curriculum will now better prepare our students to the world of work. We are also increasing investments in technical education while encouraging higher education institutions to partner with business and employers to ensure relevance of their program offerings. A strategy that can be rolled out immediately is to enhance the Government Internship Program, whereby interns are taught skills and work values.
The third problem can be addressed by the other strategies of the PDP that are meant to improve resilience to shocks. These pertain to social protection programs, climate change adaptation and even the pursuit of lasting peace.
The second challenge to be addressed is to substantially reduce poverty. A major strategy is still to link this with the plan to generate employment. The employment measure that is more indicative of poverty is underemployment. An underemployed person is one who has a job but is still looking for additional work, perhaps because he is not earning enough. A visibly underemployed person is one who is working less than 40 hours a week and is still looking for additional work. The solution, therefore, is to provide the enabling conditions for part-time employment.
More than half of the visibly under-employed are agricultural workers. The inherent seasonality of work or the low returns to agricultural labor results in high poverty incidence in the sector, almost 40% in 2009.
Linking agricultural workers to the supply chain will increase effective demand for agricultural output, and hopefully, increase returns to their labor. However, we are aware that the agriculture sector will need to improve the quality and increase the quantity of its output. Government can facilitate the linkage but we are hoping that the business sector can take on a huge role in this, perhaps through technology, additional training, equipment or others.
Good governance will continue to be the platform upon which we will implement the above strategies. I think that in the past couple of years, we have demonstrated that the President’s mantra that “good governance is good economics” works. With the cost savings we have realized because of good governance, we have managed to increase the budget for education, health, and infrastructure and increased the scale of our Conditional Cash Transfer program, even without introducing new taxes, except the sin tax. Going forward, we will advocate for the passage of the Rationalization of Fiscal Incentives bill in order to improve the efficiency of our fiscal instruments to influence growth.
Promoting transparency and accountability in government will remain in force. We will also strive to improve the responsiveness of governance. We have accomplished great strides in reducing the cost of doing business, and we intend to further streamline the processes. Going forward, we will be advocating for the use of regulatory impact assessment analytics before any regulation is imposed. This essentially compares the cost of administering and complying with the regulation to the supposed benefits. Presently, the effort is already being piloted by the DOT and the DOLE.
We are also improving our statistical system to enable us to come up with appropriate and timely policy and program responses. We hope to be able to reduce the time lag of the reporting of our National Income Accounts from 60 to 45 days. We will need the cooperation of private businesses to do this. I would like to request those that submit reports to our statistical agencies to submit them much earlier. We just started the practice of releasing the first semester poverty figures this year. And we are putting in place a survey protocol to produce nationally representative poverty statistics annually. We would like to request the indulgence of household respondents to be generous in sharing their time to answer the questions truthfully.
To sum up, let me just assure you that we are on track with respect to a number of indicators on rapid and sustained growth. We are also aware of the big challenge of achieving inclusive growth. Going forward, we are seeing various opportunities and we hope to take advantage of these in order to meet the challenge. This will require government working hand in hand with the private sector, especially the employers. We hope that ECOP would continue supporting government’s efforts in providing high-quality and sustainable jobs that our country needs to ultimately improve the lives of our fellow Filipinos. Thank you for giving me this opportunity.