THE Arroyo administration's much-touted
"highest economic growth" is "among the most inequitable" in
the region, according to a new report of the Asian Development
Bank which also said government corruption continues to hamper
development in the country.
In an 83-page study "Philippines: Critical
Development Constraints," the ADB downplayed Malacañang's
declarations of an economic take-off, saying that "while growth
has picked up in recent years, with the economy in 2007 posting
its highest growth of 7.3 percent in the last three decades,
both public and private investment remain sluggish and their
share in gross domestic product has continued to decline,
raising the question of whether the current economic momentum
can be sustained."
"In per capita terms, the growth was even
less favorable," said the ADB, pointing out from 1961-2006, "per
capita gross GDP grew 1.4 percent annually compared with 3.6
percent in Indonesia, 3.9 percent in Malaysia, and 4.5 percent
in Thailand."
The low per capita GDP growth has resulted in
a slow pace of poverty reduction and high income inequality.
The government yesterday reported that 26.9
percent of families in 2006 were below the official poverty
threshold.
"In 2003, about 25 percent of Philippine
families and 30 percent of the population were deemed poor and,
in 2006, the Gini coefficient of per capita income - at slightly
over 0.45 - was among the highest in Southeast Asia," said the
ADB.
The Gini coefficient measures inequality of
income or wealth distribution.
The ADB study also said corruption and
governance issues are among the biggest stumbling blocks to
attaining long-term and equitable growth.
"Poor performance on key governance aspects,
in particular, control of corruption and political stability,
has eroded investor confidence," the ADB said citing several
international studies and surveys suggesting that "the
Philippines' ranking in the control of corruption and
maintaining political stability has worsened."
According to the ADB, "the Philippines has
scored lowest among countries with similar per capita GDP levels
on control of corruption and political stability since 1996, and
on rule of law since 2002."
STABILITY SLIPPING
The country has also "lost momentum in
controlling corruption, and has allowed Vietnam and fairly soon,
Indonesia, to pass it. In the case of political stability, the
Philippines has slipped, particularly relative to the 1998
level," the ADB added.
The ADB explained that political problems
comparable to the 1980s, which caused a decline in foreign
direct investments, have not disappeared "in sharp contrast to
surges in Malaysia, Indonesia, and Thailand" that have cleaned
up their governments and instituted reform measures.
The report said "instability was manifested
in a number of political events in 2000, 2005-2006, and 2007
that sorely tested constitutional processes."
"The perception of worsening corruption was
found to partly explain the low investment rate in the
Philippines. Poor governance was also found to translate into
higher lending rates, reflective of premiums for worsening
corruption, political instability, and internal conflict, acting
as disincentives to private investment. A key reason for weak
revenue generation - leakages in revenue collection - is rooted
in persistent corruption and patronage problems," said the
report.
The report argues that governance concerns
underline other critical constraints. For instance, corruption
undermines tax collection and reduces resources for
infrastructure development.
"Similarly, the political instability hinders
investment and growth and reduces the tax base," said the
report.
TIGHT FISCAL SITUATION
The country's fiscal situation also "remains
tight despite the government making good progress to reduce
deficits and aims to balance its budget in 2008."
"It said that much of the reduction in fiscal
deficit has been driven by deep cuts in spending on social and
economic services and sale of government assets," said the
report.
The ADB also noted "declining public and
private sector investments in infrastructure" which has led to
"inadequate and poor infrastructure and bottlenecks" that raised
the cost of doing business in the country and eroded the
competitiveness and attractiveness to both foreign and local
investors.
"Per capita paved road length for the
Philippines is roughly one-sixth that of Thailand and one-fourth
of Malaysia," said the report.
Poor infrastructure and weak investor
confidence have led to weak flows of foreign direct investment (FDI),
the report said pointing out that the Philippines only got FDIs
worth $1.1 billion in 2001-2006, compared with $6.1 billion for
Thailand and $3.9 billion for Malaysia.
It said the country's lower FDI "partly
explains a smaller and narrower industrial base compared to its
neighbors whose share of manufacturing in GDP is 34.8 percent in
Thailand and 30.6 percent in Malaysia. The Philippines' record
is 23.5 percent.
IMPACT ON POVERTY
In a statement, ADB chief economist Ifzal Ali
said "targeting and removal of the most critical constraints
will lead to the highest returns for the country. It will spur
investment, which in turn will lead to sustained and high growth
and create more productive employment opportunities."
"This would ensure that the fruits of
development are shared by all," Ali added.
The United Opposition said government figures
showing an increase in the number of poor Filipinos is the best
argument for President Arroyo to resign.
"Her misplaced economic policies and the
massive corruption have led us to this situation," said UNO
president and Makati Mayor Jejomar Binay.
He said Arroyo has consistently justified her
stay in power by citing the supposed gains in the economy under
her term.
"Now that government figures show that she
has failed to improve the lot of million of Filipinos, and has
in fact increased the number of poor Filipinos, it's time for
her to go," he said.
The National Statistical Coordinating Board
said Tuesday that poverty incidence in the Philippines worsened
to 32.9 percent in 2006 from 30 percent in 2003.
ONLY ARROYO ALLIES
Binay said the only ones benefiting are
Arroyo cronies and business associates, and political allies
"who make millions in kickbacks and juicy government contracts."
Sen. Mar Roxas bewailed the rising incidence
of poverty from 2003 to 2006 as reported by the NSCB.
He said this only shows government is busy
covering up anomalies and neglecting its duty to provide relief
for the public in the midst of rising prices of oil and other
commodities.
The NCSB figures, he said, clearly showed a
disconnect between the financial markets and the grassroots
economy, and a widening gap between rich and poor. From 4
million poor families in 2003, this went up to 4.7 million in
2006.
The National Economic and Development Authority on Wednesday
said poverty worsened because of increasing prices of
commodities and the insufficient income of the citizenry, with
"external factors" like high oil prices playing a role.
