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10:53 AM March 5th, 2014

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By: Fernando Fajardo, March 5th, 2014 10:53 AM

The first decade of the new millennium saw the Philippine economy rising faster annually than in the previous three administrations. Under Arroyo, the economy grew by close to 5 percent a year. With just about 2.0 percent in annual population growth, per capita GDP should have grown also by close to 3.0 percent a year in her decade of rule. Now under Aquino, economic growth is even faster at 7 percent or more annually. But while faster now, the increase in per capita income, however, does not mean anything to many people whose actual income still fall below the poverty line. Why?

Many reasons can be cited but many keen observers of the Philippine economy would point out to the failure of the government to industrialize the economy as the main culprit. This can be admitted because unlike agriculture and services, industries pay more to their workers and thus helping them to move out of poverty easily.

For my part, however, I maintain that one big reason for our high incidence of poverty is our failure to balance the spatial development of the country which presently favors only Metro Manila or the National Capital Region (NCR). Of what use are the industries to many of our people in the countryside if they were just concentrated in Metro Manila and close neighbors like Calabarzon or Central Luzon?

For the record, many programs were tried by the government to promote the dispersal of development to the countryside. One was the Land Resettlement Program before the last war and continued after independence designed to develop the less populated areas in the north and south end of the country. Another was the establishment of local development authorities which were established to meet the clamor of the local politicians to develop their respective areas.

Other attempts to develop the countryside involved the establishment of export processing zones and industrial estates, and the promotions of small and medium scale industries, Here the intentions were good but for one reason or another such as the lack of financing for small and medium scale industries or lack of budget for the local development authorities, all past programs intended to disperse development failed to meet their objectives.

At the start of Martial Law in 1972, a much bolder program to promote regional development was put into action. This came with PD No. 1 which approved the implementation of the Integrated Reorganization Plan (IRP) of the executive branch of the government. The IRP transform the National Economic Council into the National Economic and Development Authority and placed all the existing regional and local development authorities under its power. Part VII of the IRP aims to promote regional development through planning and coordination of development in the different regions of the country. The IRP called for the creation of Regional Development Councils (RDCs) in every region to serve as its super planning body and spearhead its development.

The RDCs were fully in place since the mid-1970s. How effective were they in bringing about progress to the different regions outside of Metro Manila?
To answer this question it might be well to see first the actual condition of the different regions of the country in relation to Metro Manila. In 1975, I find that Metro Manila or the NCR, despite having less than 1% of land and 11.8% of population of the entire country, had 31.6% of the gross regional domestic product (GRDP) and per capita GRDP which was 2.67 times bigger than the national average. Meanwhile the Visayas and Mindanao only had 18.9 percent 16.9 percent of the GRDP, respectively, and per capita GRDP which were very much lower than the national average. Clearly, there was a great imbalance in the spatial development of the country in favor of Metro Manila.

Thirty seven years later in 2012, instead of reducing this spatial development imbalance, the situation got worse. At this time, Metro Manila’s share of the GRDP went up to 35.7 percent while its per capita GRDP is now 2.79 times bigger than the national average. The result of this was for the Visayas and Mindanao to suffer cuts in their GDRP share down to only 12.7 percent and 14.4 percent, respectively, with the corresponding decrease also in their per capita GDRP as a percent of the national average.

Now it only remains to see that poverty incidence is also very high in regions away from the NCR. In 2012, this starts with 55.9 percent in the Autonomous Region of Muslim Mindanao followed by ten other regions with poverty incidence that exceeds the national average which was placed at 25.2 percent of the population. When poverty incidence was measured in 2006, only 6 regions, led by Metro Manila had poverty incidence lower than the national average. The same 6 regions maintained the positions in 2009 and 2012.

To reduce poverty, the regional development imbalance must be corrected. For this to be done, this will obviously require review of Philippine regional development policies such as the RDC system. When the RDC system was put in place, for example, why did the spatial development imbalance persisted or got worse? What is wrong with the RDCs? Is it the lack of funds to implement their regional development plans which forced them to submit their proposals to Manila for consideration by the national government agencies concerned which may have their own priorities different from that of the RDCs? Or something else?

To reduce poverty, I believe that the local government code must also be revisited because much of what happens in the region is also explained by what is done or not done by the local government units (LGUs). Based on the 1991 Local Government Code, 40% of the BIR collection, three years prior to the budget year, is given to the LGUs. Known as Internal Revenue Allotment (IRA), this amounts to P274.5 B this year which represents 63.8 % of all LGU Resources. What has happened to the large sum of IRA that went to the LGUs since 1992? Why are many LGUs still devoid of any sign of progress?

Another thing that needs reviewing is the PPP program of the government. How much of that is directed to the regions outside Metro Manila and its close neighbors. Without the infrastructure how can we expect the regions to develop?

What do you think?

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