MY TWO CENTS’ – Financial ratings good but inclusive growth still slow (Part 2)

Abundant Agriculture, cheap power, and high quality free public education are what will serve as the long term driver of inclusive sustainable economic growth. These are the foundations that make great nations.
At present, a third of our citizens live below the poverty line. This is about 30 million Filipinos who have difficulty making ends meet. Is it because of their incapability? No. It’s their capacity. In other Asian countries, lower food and power costs have driven industrial development. Here scarcity is always the rule. The problem is always meeting demand. In this situation, costs will always be high, and government is compelled to lower the barrier of entry through incentives, tax breaks, and other sweeteners. Over the last two decades we have been a net importer of basic commodities like rice, coffee, chocolate, even beef! We cannot import power and are thus doomed to pay expensive rates for the locally available yet scarce and expensive supply. Encouraging greater participation in the economy will reduce poverty and create a bigger market to enlarge the economy further, as more people buy more locally produced items, creating more employment and opportunity.
Chronic scarcity of essentials drives up cost, abundance lowers cost. Allowing such scarcities are the mark of incompetent governance over the last few decades. This is a chronic situation that must be stopped. It can be done. But it is not done. The availability of cheap power, food, and free high quality education is the hallmark of being an advanced economy. You don’t hear of problems meeting supply in advanced countries. But here it seems to be the rule. Over all, costs of doing business are high and therefore, entry of new businesses is more difficult. How can you have inclusive growth when barriers are too high for new investment by those other than the current class of businesspeople? Lower costs allow a greater number to participate in economic growth, and allow more wealth to be shared.
Smart money policies are not enough. At the moment you have clever monetary policies to create growth and lower inflation by encouraging rating agencies to look favorably on our economy. These are what have created the opportunities at the moment. But the comments on the lack of inclusive growth show that these policies are temporary measures that cannot substitute for real low cost inputs that can feed the growth of industry by lowering the cost of establishing and manufacturing enterprises, and keep future workers happy through the low cost of power food and affordable, quality education. Seven years of seven percent growth cannot be sustained by smart monetary policies alone. Inflation will need to be kept low, and this can only be done by increasing food and power production to lower cost. Low costs are what make growth more inclusive through the lower cost of doing business. International financial institutions themselves are saying so.
Lower costs keep talent in. These high costs are also what drive talent away from the Philippines, especially if you live in Metro Manila. Little wonder why we elect many incompetent leaders and why the talent pool is siphoned off abroad. Wages can be kept high as other costs are lowered, and more talented people will stay. Moreover, the higher quality of life for a bigger portion of the populace creates the political stability need for sustained growth. Happy families at home are the result of strong economic policies at home.
Local initiative and governance has worked for us. The key, as always, is the enabler. As such, achieving this is to capitalize on the strengths of individual regions that so far are the bright spot in Philippine governance. A preponderance of local initiative in pushing reforms and proper implementation of national rules is what has created the boom cities of Davao, Cagayan de Oro, Cebu and Iloilo. Hence, a federal form of government will help institutionalize these gains obtained under autonomous governance brought in by the Local Government Code. Political will from Manila is not enough to drive change and performance. National programs can serve as guidelines and benchmarks, but should not be the locus of effort. Local initiatives to create responsible governance are the way forward – this is where change will happen.