EDITORIAL

Industrialization Will Eradicate Poverty

by ERNESTO T. SOLIDUM

The UN International Children’s Educational Fund (UNICEF) bewailed yawning gap between the rich and  the poor in the Philippines. In a paper published by the UN body, the top 20 percent of the population enjoys more than 70 percent of the total income compared to the bottom 20 percent who gets paltry two (2) percent in 2007. It recommended structural reform but at the present pace, this will take 800 years for the bottom 20 percent to achieve 10 percent of the highest income. 

 
Cielito Habito, former NEDA Director said that the top Filipino families accounted for 76 percent of the growth of Gross Domestic Product (GDP). In contrast, Thailand has only 33.7 percent, Malaysia – 5.6 percent and Japan – 2.8 percent.

 
The UN Millennium Development Goals (MDG) noted that the Philippines got failing grades in eradicating/extreme poverty, achieving universal primary education, eradicating child mortality and sustaining maternal health. Specifically, the Philippines has the highest population poverty incidence and income inequality with a factor of 12 followed by China – 6.4, Vietnam – 5.4, Thailand – 4.3, Malaysia – 1.7 and Indonesia – 1.5.

 
The Philippines’ Gross Domestic Product (GDP) per capita at $4,100 is 17 percent higher than Vietnam’s $3,400 but clobbered by superior economies of Thailand’s 78.0 percent - $19,500; China’s 77.8 percent - $18,500; Malaysia’s 74.0 percent - $15,800; and Indonesia’s 72 percent - $14,700. Virtually the International Monetary Fund (IMF) classifies the Philippines as a laggard economy compared to its Southeast Asian neighbors. The only comforting news is that GDP of 7.0 might be achieved by the end of year 2013.

 
Arsenio Balisacan, NEDA Director said that the country’s key to eradicating poverty lies in industrialization. This means strengthening the manufacturing, construction and mining sectors to boost exports and domestic consumption. 

 
Manufacturing is largely dominated by micro, small and medium industries, only less than 1 percent administered by large companies. Despite the fact that iron ore is substantially produced in the Philippines, we turn out only 1.5 million MT’s of steel per year compared to China’s 900 million MT’s and the United States’ 64 million MT’s. It should be noted that steel is basic raw material in manufacturing.

 
The Progressive Car Manufacturing Program that started with Pres. Marcos in the mid 1970’s had all the elements of success but somehow failed because of technical incompetence. This valuable insight was later adopted by other Asian states like South Korea, and Malaysia. Now they are benefitting from the national success of industrialization including Singapore and Thailand. 

 
Positive factor for manufacturing could be the presence of robust service sector. Overseas Filipino Workers annually remit $22 billion. We must move however, that high power costs must be brought down to tolerable level. 

 
Construction is undertaken by both private and public sectors. Majority of the buildings being constructed are for residential and commercial purposes and located in urban centers. Government infra spending is on roads, airport, seaport and irrigation projects appropriating  three (3) percent of the total GDP. The World Bank however recommends infra spending of five (5) percent to achieve inclusive growth especially employment and poverty alleviation.   

 
According to Philip Romualdez, Chamber of Mining Industries president, the Philippines has the 5th most extensive mineral deposits in the world. The metallic ones are gold, silver, copper, nickel, and chromate. The non-metallic are marble, limestone, clays, feldspar, rock aggregate, dolomite, bentonite, and guano. He identified the two kinds of mining activities: a) small scale (low financed and responsible for lots of damage to environment), and b) large scale (high financed and technically efficient).

 
Small scale mining is rampant in Mt. Diwalwal causing loss of human lives and destruction of once pristine watershed. On the other hand, there are companies which are committed to their mission. One is the Philippine Mining Corp. which is 56 years in operation in Benguet. It is accredited as first mining company in the country to achieve ISO 14001 status for environmental management.

 
Finance Secretary Cezar Purisima reported the government collects two (2) percent excise tax on gross revenues of mining firms which reach P2 billion a year. If mining sites belong to indigenous people they also pay royalty tax of 5 percent. Mining firms all over the Philippines spend P11 billion per year for national and local taxes.

 
The worsening unemployment, underemployment in the country are forcing 3,000 Filipinos per day to seek foreign jobs. Fifty percent are women where large majority are engaged in menial jobs. Practically the government’s response to poverty problem is the giving of Conditional Cash transfer which is said to be inutile, palliative and unsustainable. Our failing grade on MDG means that our policy direction is naïve and archaic. It is better for the Philippines to allocate ample cash to jumpstart industrialization. 

 
Industrialization is the key to faster and sustainable growth. Today, we are already 50 years economically behind from our rich Southeast Asian neighbors. We are bullied by China, Hongkong, Taiwan and Malaysia simply because we are poor, unarmed and cannot win a shooting war against them. Let our misery and misfortune end through industrialization. /MP