A GOVERNMENT THINK-TANK said traditional strategies were crucial in pushing the Philippines toward recovery from the impacts of the global financial crisis.
These strategies include the promotion of investments in the rural sector and in quality basic education, as well as limiting population growth.
In its latest study released Thursday, the Philippine Institute for Development Studies (PIDS) said these policies had been proven helpful in the rise of Asian economic powerhouse like Singapore, South Korea and Japan.
“The 2008 global and economic financial crisis magnified the existing structural problems underlying the Philippine economy,” PIDS said in the paper penned by Josef T. Yap, Janet S. Cuenca and Celia M. Reyes.
“It behooves the government to use the current crisis as a platform to design and implement wide-ranging reforms,” it added.
According to the three economists, it is most important to encourage investments in areas that require significant amount of labor such as the rural sector, where there is a high degree of underemployment and low productivity.
“Increased public investment in rural infrastructure and provision of extension services are vital for raising productivity in agriculture,” they said.
“A rise in productivity in the farms will also benefit the non-farm rural economy.”
They cited as an example rural roads and rural electrification as among those that would directly facilitate the expansion of the non-farm sector.
In turn, increased incomes from improved farm productivity will raise demand for the output of the farm sector.
Another crucial move is to push forward strategic industrialization, by encouraging multinational firms to source their inputs from domestic firms as what the Singaporean government did under its Local Industries Upgrading program.
This resulted in turning domestic small and medium enterprises (SMEs) into attractive input and service suppliers.
“This can also be used to integrate domestic SMEs—which are more labor-intensive than large firms—into growth areas,” the paper said.
“The idea is that while industrialization is largely attributed to large-scale enterprises, subcontracting with small and cottage producers was practiced widely.”
“In cases where globalization and competition have (forced) exporting firms to use capital-intensive production technologies developed in industrial countries, these firms can turn around and engage domestic SMEs for support production services,” the paper added.
Such “local production strategy” is likened to the tack pursued by Japan to avoid dependence on imports. Further, the PIDS raised the importance of gearing human resource programs for trainability, which means good basic education, rather than for a tertiary level diploma for the majority of the students.
Without this direction, education will continue to fuel migration from rural to urban areas or an exodus of trained workers abroad.
As for the sticky issue of population, PIDS said moderating growth would also be critical in containing unemployment, particularly for the Philippines where moderate economic growth failed to reduce unemployment rates.
