Towards more decent jobs

What we often we see are piecemeal and disintegrated solutions to the Philippines’ pressing problems of poverty and unemployment. People look to DOLE for employment solutions and to DSWD for poverty solutions. Government needs a more integrated approach and can in fact kill two birds with one stone. The stone has a name – major policy overhaul.

Economists speak

Studies have shown that the root cause of these problems are policy lapses, poor execution of programs, lack of strong political will, and inability to take full advantage of opportunities. The “three tenors” of the Philippine economy are singing the same song, but no one seems to listen.

In 2013, my friend Dr. Karl Kendrick Chua, Senior Country Economist of the World Bank, wrote the Philippine Development Report. He believes that “the reason why the country is not able to massively create good jobs despite higher economic growth in recent years is its long history of policy distortions that slowed the growth of agriculture and manufacturing in the last six decades. There is no simple and effortless way to address this jobs challenge, as this is linked to deep-seated, structural issues in the economy. A unique window of opportunity exists today to accelerate reforms that will help create more and better jobs.”

Chua’s World Bank study points to “decades of policy distortions, underpinned by centuries of extractive institutions” as the root cause for the Philippines’ economic ills today. Lack of competition, complex regulations, insecure property ownership, and lack of investments have led to very low agricultural productivity and weak manufacturing in the Philippines. The outcomes are predictable – poverty, increasing informality, and out-migration.

A few years back, another economist friend and colleague in poverty alleviation, Dr. Cielito Habito, estimated that only 40 families accounted for 76 percent of the GDP growth in the Philippines. He concludes, “It is not enough, then, to attain a high output growth rate; the growth must also be broad-based to be of wider benefit to the general population.”

Habito believes that the outcome should be a more equitable wealth creation and distribution, in an environment where job opportunities abound, even for the most vulnerable sectors of society.

Economist Dr. Ben Diokno thinks that the country’s economic fundamentals aren’t as sound as those of the leading ASEAN countries. Our unemployment rate and poverty incidence are the highest in the ASEAN. The Philippines also has the highest corporate and personal income tax rates among the ASEAN nations. Most economists and businessmen believe that energy or power will fuel economic competitiveness. For investments to increase, there must be more stability in government.

Diokno prescribes the following solutions: Attract more FDIs to fuel job creation; build better infrastructure through hybrid PPP; rationalize taxes; improve budget planning and spending; invest in human capital; revitalize agriculture and manufacturing, instead of building more malls; and build and strengthen political institutions.

Another economist friend, ADB’s Dr. Norio Usui, repeatedly said that the Philippines must stand on two legs – services and industry (manufacturing) to be globally competitive.

The JFC prognosis

In 2010, the joint foreign chambers of commerce and industry (JFC) submitted to government a compilation of 470 recommendations that can address the country’s competitiveness problems. John Forbes coordinated the process and compiled the “Arangkada” recommendations. At that time, the JFC thought that the Philippines could create 1,000,000 new jobs per year if it attracts $7.5 billion of foreign direct investments (FDIs) annually. Job creation can happen in agribusiness, IT-BPO, creative industries, infrastructure, manufacturing and logistics, mining, and tourism, medical travel, and retirement.

However, reforms are needed in Business Costs, Environment and Natural Disasters, Foreign Equity and Professionals, Governance, Judicial, Labor, Legislation, Local Government, Macroeconomic Policy, Security, and Social Services (Poverty, Education, Health, and Population). The foreign equity restriction is still seen as the biggest barrier to investment creation, and therefore job creation.

Slow pace

For a country with an average age of 22.3 y/o, reforms are very slow. Last year, PHL dropped six notches from 97th to 103rd place in the World Bank’s Ease of Doing Business survey among 189 countries. The JFC’s Arangkada recommendations were supposed to move the PHL economy faster towards global competitiveness. Unless reforms are hastened, we will continue to slide in global competitiveness.

Job creation will continue to depend on investments, whether domestic or foreign. But until we fix our economic fundamentals and have more globally competitive government policies, our potential for creating more decent jobs will be hampered.

It doesn’t take a rocket scientist to figure out that “Investment equals Employment.”
(Ernie is the 2013 Executive Director and 1999 President of the People Management Association of the Philippines (PMAP); Chair of the AMCHAM Human Capital Committee; and Co-Chair of ECOP’s TWG on Labor and Social Policy Issues. He is President and CEO of EC Business Solutions and Career Center. Contact him at [email protected])