Growing population a boon or a drag to a more developed Philippines by 2050?

A study recently published by multinational financial services firm HSBC says the Philippines, a middle-income country with about 26 percent of its population living below the poverty line, will be the 16th largest economy in the world by 2050.

By then, according to the study, the Philippines will have outperformed all of its Southeast Asian neighbors, including Singapore.

The HSBC study cites the Philippines’ growing population, which is said to meet the growing demands for labor as more investments come in, as one of the factors that will help the country significantly progress over the next four decades.

The rosy projection for the Philippines has thrilled some, but has also caused others to raise their eyebrows.

The study—titled “The World in 2050” and authored by Karen Ward, Nick Robins, and Zoe Knight of HSBC—has refueled the debate over whether the country’s growing population is really an advantage or a drag on the Philippines’ quest to becoming a developed economy over the long run.

The release of the study came amid ongoing talks on the Reproductive Health (RH) bill, which is both being strongly pushed by supporters and ardently blocked by critics.

Some economists say the bill, which seeks to promote family planning, is long overdue and has been one of the missing pieces for faster economic growth; others thumb it down, cautioning against what they consider as its potentially adverse effects on the economy.

Side 1: Why the country’s growing population is a bane

Dr. Ernesto M. Pernia, an economics professor from the University of the Philippines and a former economist from the Asian Development Bank, says a growing population serves as an advantage for an economy only if it meets the quality of labor required by businesses.

The problem with the Philippines, he says, is that growth in its population is driven by poor households who cannot afford to provide education and other basic needs for their children. Consequently, he says, these children grow up finding difficulty in getting jobs and end up being poor themselves. This trend leads to the problem of inter-generational poverty, he says.

‘Shoddy’

“It seems that HSBC, in drawing its conclusion, just considered the size of the population, completely ignoring the fact that for a labor force to become an asset, it must be educated,” Pernia says, describing the conclusion of the HSBC study as “shoddy.”

Pernia says policymakers should acknowledge that resources—both of private households and the government—are just not enough to educate all Filipino children.

This point is substantiated both by the significant number of out-of-school youths who belong to households that cannot support them, and the insufficiency of public schools, classrooms, and other facilities needed to provide good-quality education to all the country’s school-aged children.

The problem of poverty has been cited by many international institutions, including the ADB and the World Bank, as one of the biggest challenges that the Philippines has to overcome.

Educated workforce

While other Southeast Asian countries were able to trim their poor populations over the years, the Philippines has seen its poverty incidence rise.

Latest government statistics show that the number of poor Filipinos stood at 26.5 percent of the Philippine population in 2009, up from 26.4 percent in 2006 and 24.4 percent in 2003.

The poverty rate in the Philippines in 2009 was much higher than Indonesia’s 13 percent, Thailand’s 8.1 percent, and Malaysia’s 3.8 percent.

Pernia opines that the projection that the Philippines will have outperformed all its Southeast Asian neighbors by 2050 was highly unrealistic given the country’s rising poverty. Another problem hindering growth is the lack of investments, which Pernia says would need an educated workforce to come into the country.

Foreign direct investments into the Philippines was estimated to be just a little over a $1 billion in 2011, paling in comparison with Malaysia’s $10 billion and Indonesia’s close to $20 billion.

Total investments, including those of locals, stood at only 15.6 percent of the Philippines’ gross domestic product in 2010.

This figure was inferior compared with Cambodia’s 17.2 percent, Malaysia’s 21 percent, Thailand’s 26 percent, Indonesia’s 32 percent, and Vietnam’s 39 percent.

“Our neighbors have been addressing the issue of poverty and investments. At the rate we [the Philippines] are going, it is impossible for us to be more progressive than Indonesia, Malaysia, and Thailand by 2050,” says Pernia, who is an advocate of the RH bill.

Pernia also notes the drag caused by poverty on tourism, which many consider to have a great income potential if the country’s natural resources were the sole factor to be considered. The UP economist says the picture of poverty is a turnoff for some tourists.

Former president’s doubts

The HSBC study has caused not only an economist but also a former president to express his doubts.

Former President Fidel V. Ramos, who says he regretted that the administrations that came after his did not make a strong follow-through on the population program during his term, says the projection of the HSBC study was pleasing, but stressed that it was a fallacy.

“It is not the quantity but the quality of the labor force that counts,” Ramos says.

He says that without a strong family planning program that will address poverty, becoming a progressive country is just not possible.

Ramos cites another study, commissioned by the Asian Development Bank and released last year, that projected the Philippines to remain among a group of slowest-growing economies in Asia by 2050 given existing problems on poverty, weakness of institutions, and lack of investments, among others.

The ADB-commissioned study, titled “Asia 2050: Realizing the Asian Century,” grouped the Philippines together with Myanmar, Laos, Bangladesh, Nepal, Sri Lanka, Bhutan, Maldives, Mongolia, Afghanistan, Pakistan, Tajikistan, Uzbekistan, Turkmenistan and Kyrgyz Republic, among others.

On the other hand, it categorized Brunei, Singapore, South Korea, Hong Kong, Macau and Taiwan to be among the most progressive Asian economies by 2050.

Ramos says the study commissioned by the ADB should serve as a wake-up call for the Philippine government and the private sector to address pressing problems that continue preventing the country from catching up with its neighbors.

War against poverty

Ramos says the country, first and foremost, has to address the problem of poverty—adding that population management is a prudent way to do it—if it is to become one of the most progressive economies.

“The country’s biggest battle is not against terrorism; it’s against poverty,” the former chief executive opines. Winning the war against poverty will somehow alleviate tendencies for armed conflict, such as that seen in the southern part of the country, he explains.

Side 2: Why the country’s growing population is boon

Meantime, there are also economists who agreed with the HSBC’s claim that a growing population will help the country’s efforts toward progress.

Bernardo De Vera, economics professor from the University of Asia and the Pacific (UA&P), an Opus Dei institution, which opposes the RH bill, says that before one harps on the significance of quality over quantity of population, the point that a sufficient number of population is needed to run an economy should first be established.

“It is true that economic development is not only a matter of quantity nor a matter only of having warm bodies. However, a country has to have warm bodies to begin with,” De Vera says.

De Vera opines that the problem of poverty, although a heavy burden, is easier to solve than the problem of not having enough people. He says controlling population growth poses the serious threat of population aging and dwindling number of human resources, which many advanced economies now face.

He says the projection that some more developed economies like Singapore will be overtaken by the Philippines by 2050 hinges on the fact that the former are now facing serious problems of population aging.

De Vera also disagrees with the notion that there are not enough resources to educate all school-aged children in the country. He says government resources, if efficiently monitored and allocated, should be able to accommodate the education needs of Filipino children belonging to households that cannot financially afford sending kids to school.

Dr. Victor A. Abola, also an economics professor from the UA&P, says a large population is an advantage rather than a drag on economic growth based on two fronts—advancement of knowledge and economies of scale.

“Advances in knowledge are faster in a large population because intelligence and genius is not confined to the rich. It is normally distributed, and, therefore, with a larger population you would have an absolutely larger number of outstanding people who do make a difference,” Abola says.

He adds that economies of scale (which happens when cost of per-unit production declines as volume increases) can be more easily achieved with a large population. Countries with smaller population have to rely on the export markets just to achieve economies of scale, he explains.

Abola says previous studies have concluded that 58 percent of economic growth can be traced to advancement in knowledge, while 17 percent is anchored on economies of scale.

On the HSBC’s projection that the Philippines can become one of the biggest economies in the world by 2050, both De Vera and Abola say that such a projection is realistic.

De Vera says ongoing efforts of the government to improve governance and rising contributions from the private sector as far as investments are concerned should bear positive results over the long term.

Abola says existing resources of the Philippines, including human capital, will help the country become progressive decades from now.

“Discrediting the findings of the study outright is unscientific and biased. “Yes, I agree with the conclusion of the HSBC study that the Philippines objectively has what it takes to be on the Top 20 biggest economies in the world by 2050,” Abola adds.

Where the two sides meet

Although people disagree over whether the country’s growing population is boon or bane for the economy, there is a consensus that good-quality education and training are badly needed to have the human resources required to attract more job-generating investments, which in turn are necessary to sustain a robust growth for the Philippines.

“Education is key,” UP’s Pernia says.

“We can achieve faster growth through education,” UA&P’s De Vera says.

However, whether the country has enough resources to provide good-quality education and training for its people is still open to debate.