Industry holds key to poverty reduction

For the government’s chief economist, the key to eradicating poverty lies in industrializing the country.

Arsenio Balisacan, director general of the National Economic and Development Authority, said both the government and private sector should have a sense of urgency in implementing projects and programs that would significantly expand the share of industry to the economy’s output.

The industry sector is composed of manufacturing, construction and mining.

Industrialization is a phase of development where an economy turns from one based on agriculture into another that relies on technological advancement and innovation.

Balisacan believes that, by increasing the share of industry to the country’s growth, more people from the low-income segment will acquire jobs, and this will set off a chain reaction that will positively affect the economy.

For years, the Philippines has relied mostly on the services sector for growth and the agriculture sector for employment. But while Balisacan acknowledges the significant contributions of the two sectors, he maintains that industrialization will speed up the process of poverty reduction.

At 27.9 percent as of the first semester of 2012, the Philippines has one of the highest poverty rates among emerging Asian economies, even though the country grew by a better-than-expected 6.8 percent last year.

Balisacan called for higher government and private-sector spending for research and development (R&D).

He said R&D spending in the country is one of the lowest in Southeast Asia at only about 0.1 percent of gross domestic product.

Higher investments in R&D are needed to improve production of Philippine manufacturers, he said.

“We need to harness appropriate science and technology to address the constraints and challenges facing the sector…. Many of our neighbors have long realized the value of science and technology in long-term growth and economic development, and have made significant investments in R&D,” Balisacan yesterday said in a speech during the 36th Annual Scientific Meeting held at the National Academy for Science and Technology.

He said the country needs to diversify from electronics, garments, and machinery and transport equipment—which together made up most of the country’s exports.

He also raised the need to improve access to financing so that small and medium enterprises can develop and improve their ability to supply goods to big companies.

But the government, he said, would need to continue investing more on infrastructure, reduce power cost, address inconsistencies in regulatory policies, and improve tax collection to boost resources for the development of industries.