Failure of policy to shift from early success in import substitution into export industrialization and poor governance in general, characterized by high level of corruption from the top down to the local level, constrained the country from sustaining its rapid economic growth and advantage over its neighbors that it enjoyed in the first decade and a half after the last war as reconstruction of the ravaged Philippines proceeded fast.
After that, many decades of sluggish economic growth, coupled with relatively faster population growth put the country behind its more progressive neighbors which did better in both counts. As of last year the Philippines ranked 12th in population size among all the countries in the world but only 39th in GDP ($284 billion) and 129th in per capita income ($2.865) at current price.
If a Filipino had one dollar in his pocket, a Singaporean would have $19.7, an American $19.1, a Japanese $12.1, a Korean $9.8, a Malaysian $3.8, a Chinese $2.6, a Thai $1.9, and an Indonesian, $1.23. Our only consolation was that in 2014, we were still better off than the Vietnamese with $0.72 and the Indian with $0.57.
Failure to industrialize condemned the Filipino workers to engage in less productive activities in agriculture in the rural areas and services in the urban areas or to work or migrate abroad.
Up to 1980, more than 50 percent of our workers still depended on agriculture for employment, with services providing jobs for more than 30 percent and industry with just over 15 percent.
This is a wrong mix because it is industry that normally produces more output per worker, followed by services and agriculture in that order. But instead of shifting more of our workers to industry, the share of employment in industry remained at 15.4 percent in 2012. In the same year, the agriculture sector employed workers went down to 32.2 percent while that of services went up to 52.4 percent.
Failure to industrialize finally meant that in 2012, although an industrial worker productivity was 2.03 times in output than the national average, the industry sector which accounted for 15.4 percent of the workers could contribute only up to 31.2 percent of the GDP while agriculture, which accounted for 32.2 percent of the workers, contributed very little to the GDP at 11.8 percent because its labor productivity was only 0.37 percent of the national average. Services with 51.4 percent of the labor force had a labor productivity equivalent to 1.11 percent of the national average.
This meant that it could only contribute up to 56.9 percent of the GDP.
It’s not a miracle yet but the Philippine economy surged in the last five years under the “Daang Matuwid” banner of the Aquino government.
In the last five years up to 2014, the economy grew by 6.2 percent annually, the highest sustained five-year average annual growth rate since the decade and a half after the last war. The good thing about this is that it was achieved when the global economy has not fully recovered year from the 2008-09 Global Recession. Now while the Philippines is surging, our neighbors are still struggling, including China which has seen its almost three decades of 10 to 12 percent annual growth before the last Global Recession down to just around 7 percent annually lately.
Not only that, the other thing more important that happened is that economic growth from the production side under P-Noy in the last five years was already led by industry which grew by 7.58 percent in the last five years and no longer by services as in the time of Arroyo which grew only by 6.42 percent in the last five years. From the demand side, economic growth under P-Noy was also led already by investment which grew by 12.64 percent in the last five years instead of consumption as in the Arroyo administration which grew only by 5.32 in the last five years.
For the first semester of 2015, GDP grew by 5.3 percent from 6.2 percent in the previous period. In the third quarter, the GDP grew year-on-year by 6.0 percent. This is higher than the growth rates of 5.8 percent in the second quarter of 2015 and the 5.5 percent in the third quarter of 2014.
The growth figures in the first three quarters may indicate lower average growth for the year 2015 but the fourth quarter data that is still to be released before the end of this month may just bring in a good surprise though it is also sure already that last year’s target is no longer attainable. Yet in the light of the still not so bright global economy, the Philippine economic performance in 2015 is still very remarkable.
It may not easy to believe the World in 2050 study made by Hong Kong Shanghai Banking Corporation (HSBC) which says that the Philippines would be the faster growing economy in the world with its GDP moving up at 8.4 percent yearly from 2010 to 2020, 7.3 percent from 2020 to 2030, 6.6 percent from 2030 to 2040, and 5.8 percent from 2040 to 2050. But one thing is certain — the Philippines is no longer a laggard nor a basket case in Asia.
This means that although we are still presently behind our more progressive neighbors in many indicators of development, such is no longer to be ashamed of because instead of being flat-footed, we are now running faster than them except China. In my next column I will present how Cebu and the Central Visayas Region performed under the P-Noy Economy.
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