‘Job-shedding growth ails economy’

Riza Lozada

The Philippines suffers from a situation where the economy is among the fastest-growing in Asia but the jobless rate of between 6 and 7 percent is also among the region’s highest, according former Budget Secretary Benjamin Diokno.

Calling the affliction “job-shedding growth,” Diokno noted that the sources of growth in the country for the past few years have been more external in nature than development as a result of robust industries that make growth sustainable.

Asian economies such as Thailand, Malaysia and even Singapore all have industrial bases that guarantee a stronger rebound for their economies when the global market improves.

The growth in the Philippines economy, in contrast, is mainly driven by consumption spending that, in turn, is fed by remittances from Filipinos working abroad and the salaries of business process outsourcing (BPO) agents which are considered incomes from abroad.

The residues of the BPO boom such as growth in the property sector and the spread in fast-food outlets to serve BPO workers who work irregular hours, also contributed to growth but these businesses all depend on the outsourcing boom being maintained.

Diokno and other economists believe the job-growth paradox is also the result of the government’s failure to control rampant smuggling.

The abundance of low-cost smuggled goods in the local market perks up spending but at the same time kills domestic industries and constricts the job market as factories close shop.

Entrepreneurs who are blinded by big profits would spend effort and capital not on productive ventures but in becoming smugglers and in bribing government officials.
Those who have the determination to become Filipino industrialists are, in turn, confronted with hurdles, instead of incentives.

Aside from competing with smuggled goods, local industries are also faced with electricity rates that are among the highest in the world; lack of infrastructure and pervasive corruption and red tape.

Thus, the major source of growth remains consumer spending and capital formation but only in the property sector.

Growth in the construction industry, which produces seasonal jobs are being fed by the BPO boom.
Consumers are being encouraged to spend as a result of the ever-growing remittances from their relatives working abroad.

Of course, Filipinos are also willing to part with their hard-earned money for the low-cost smuggled goods.

The economy faltered in the latter part of 2014 mainly as a result of the government’s poor spending clip that came along with a slowdown in transfersw from Filipinos working overseas.

Agriculture output also dropped as a result of not only the impact of strong typhoons during the period but also the worsening impact of competition from low-cost imports, if not smuggled farm products.

The effect is expected to be more pronounced when the Philippines opens up its economy as part of the Association of Southeast Asian Nations (Asean) common market by the end of this year.

Government consumption and public construction are two areas where the government has direct control.

In both areas, the figures showed that both indicators were down during the period.

Public spending continues to fail to contribute to economic growth.

Diokno said the Aquino administration has no one to blame but itself for the poor public spending; it can’t blame Congress, which had religiously approved the President Aquino’s budget before the start of the fiscal year, nearly intact to the last figure.

“He can’t also blame the Cabinet members since they’ve been on the job for more than four years. It would be a stretch to argue that Mr. Aquino’s top men are still ‘learning’ on their jobs,” he added.

“It can’t blame the past administration. That would be ridiculous,” he said.

Diokno said government underspending was an offshoot of poor budget preparation since the President’s Budget or the budget he transmits to Congress contains many programs and projects that are not ready for implementation.

“Worse, it includes projects that are yet to be identified. In brief, the DBM has failed to do its job carefully and diligently,” he said.

He surmised that the DBM allowed a lot of “fat” in lump-sum appropriations within agency budgets and under the Special Purpose Funds in the 2015 President’s Budget in response to the Supreme Court decision on the unconstitutionality of the Disbursement Acceleration Program (DAP).

He saw a lot of “fat,” for instance, in the Miscellaneous Personnel Benefits Fund (MPBF).

“The enormous gap between actual budget deficit (total revenues less total disbursements) versus planned deficit suggests the severity of unmet expectations.

Agency heads are not delivering public services that they promised Congress they would deliver,” he added.
The Aquino administration’s response to the unemployment problem was a supposed job-creation program that gives priority to remunerative work.

According to Communications Secretary Herminio Coloma Jr., the government is fast-tracking its effort to bring down unemployment along with programs on poverty reduction and social protection.

He said remunerative jobs provide stability of employment and afford workers to use their natural talents and skills.

A recent Social Weather Stations (SWS) survey reported unemployment among adults at 27 percent, which was far higher compared to the government official labor survey, with unemployment at 6 percent recorded in October last year.

Coloma said the government is facing the challenge on unemployment with concrete programs on economic development and employment generation as he cited the Technical Education and Skills Development Authority (Tesda) as being instrumental in its programs for providing skills development.

The contact center industry belongs to one of the focused area that the government is heavily investing funds in through allocation from the national budget and program development that are being executed with the cooperation of private companies and foundation groups.

The President said that last year, revenues in the BPO industry had increased to $11.7 billion, and total employment was at 686,000 employees.

The government expects that by 2016, the industry would achieve a target of at least P15 billion in revenues and 900,000 employees.
But Diokno said that key to reducing the economic scourge of limited job availability remains the government and the low spending clip of the Aquino administration is not helping improve the situation.