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[OPINION] PNoy and inclusion

Introspective By Raul V. Fabella

One of the few experiences of pure exhilaration and hope at the start of 2021 was negotiating the newly opened Skyway 3. Those of us who have suffered through the travails and tribulations of the old normal EDSA on our way to south Metro Manila and NAIA feel like we are being teleported to the highways and byways of more affluent countries where these amenities are a common sight and which we, perhaps, sometimes and with reason, despaired of ever having. In my own mind I associate these amenities with economic abundance; which is why driving through Skyway 3 makes me feel like being at the door of similar abundance. Such buoyancy and exhilaration are becoming a more common experience, thanks to the presidency of Benigno Aquino III, popularly called PNoy.

What do all the entries in the following list have in common — the newly inaugurated Skyway 3, the Tarlac-Pangasinan Expressway (TPLEX), the Ninoy Aquino International Airport Expressway (NAIAX), the Cavite-Laguna Expressway (CALAX), the North Harbor Link Project? First of all, they were constructed under the Public-Private Partnership umbrella and, second of all, the contracts for major phases of these projects were signed and work started in President Benigno Aquino III’s watch. Finally, they will be operated by private groups making them more accountable and sustainable. They freed the national treasury of required funding apart from the right-of-way financing.

And they all make you feel increasingly like you belong to, rather than are being left behind by, the emerging Asian Century. When I was breezing through TPLEX for the first time on my way to Baguio, my heart skipped a beat and I stopped to acknowledge my debt of gratitude to PNoy’s watch. Viewed from the lenses of 20 years ago, they seemed so improbable, they may as well have been “black swans.” Thanks to PNoy’s watch that made PPP the main powertrain to arterial infrastructure, they are slowly being dragged towards the center of our experience where they belong. And because they lower the cost of transported produce to both rich and poor, they are inclusive.

And how did we, PNoy’s bosses, fare as a nation under his watch? The average rate of growth of the Philippine GDP during PNoy’s watch was 6.2%, higher than the average during the watch of any president in our history. The puzzle in 2015 was why the rapid economic growth (7.3% in 2014) did not seem inclusive — the poverty incidence seemed stuck at 26% which was where it was in 2010 when the PNoy watch started. So worked up was PNoy about this that he personally puzzled over it with Planning Secretary Dr. Arsenio Balisacan. Dr. Balisacan was, and still is, a strong proponent for riding economic growth to poverty reduction. This conundrum in 2015 proved premature when in November 2016 it was announced that the poverty incidence had declined from 26.3% to 21.6%, an almost 5% difference in six years, a remarkable achievement in our neck of the woods and even elsewhere. Had we chipped away at poverty at this rate during the Millennium Development Goal (MDG) Era (1990-2015), we would have more than attained the MDG target of 17% poverty incidence. As it turned out, we went from 34% to only 26% among those that fell short of the target. Dr. Balisacan was right: poverty reduction almost always tracts economic growth, if with a lag!

What made for this inclusion outcome during PNoy’s watch? PNoy’s watch scaled up the CCT Program (Conditional Cash Transfer or 4Ps) where targeted poor were accorded cash transfers to keep kids at school. That clearly should account for some improvement. But largely glossed over (PNoy himself was primarily concerned with why CCT did not seem to figure in the 2015 poverty statistics) was the marked change in the emerging structure of the Philippine economy in his watch. Everyone noticed the economy growing faster but few noticed that the quality of growth was also improving — growth was becoming more favorable to poverty reduction. This is because economic growth has two aspects: first is quantity of growth (whether it is high or low); the other is the quality of growth: whether its leading edge is markedly more pro-poor because it employs more people from low-income classes and pays higher and more stable incomes to the less educated. Manufacturing is more pro-poor in low-income countries (< $10,000 per capita) than the Services sector as it does exactly those functions better. Thus, when Manufacturing leads growth, poverty incidence retreats faster that when the economy is growing with Services as the leading edge. The figures in the chart show the comparative growth performance of Manufacturing and Service sectors for all the presidential watches since Marcos.

The red bar shows the growth of the Service sector and the blue bar shows the growth rate of the Manufacturing sector for each presidential watch. Note that the blue bar is always shorter than the red bar except during PNoy’s watch. Under Aquino III’s watch, Manufacturing was leading the growth of the economy: it was a growth characterized not only by quantity but by quality. Neither the romanticized Marcos’ watch nor the deservedly admired Ramos’ watch could match.

If I may hazard a guess, it was foreign investment and especially Japanese foreign investment that made the big difference in the growth of Manufacturing. Foreign investment just over $1 billion in 2010 grew to $8 billion by 2016. It was that time when super salesperson Director Lilia De Lima, having won the Japanese investors’ trust, was herding investors to PEZA (the Philippine Economic Zone Authority) in numbers which were outrunning the available space. Matuwid na daan (the straight path) had struck a chord with foreign investors; they saw in PNoy the pedigree of one who sticks religiously to contracts — a chip, as it were, of the old petticoat. For wasn’t his mother, Cory Aquino, who as president decided that the Philippines will honor all its debts even those contracted (and squandered) by the Dictator Marcos over the objections of many left leaners in her cabinet who favored repudiation? And foreign investors flock to contract stability like bees to nectar. For PNoy was a true child of Cory: a principled but a reluctant leader, ever uncomfortable with the wielding of power. In macho circles, he would fit the description of a wimp.

A disturbing observation emerges from the figures in the chart: the Duterte watch, halfway into its term, had reverted to the old normal with respect to the Manufacturing-Service growth comparison. In the first full year of Duterte’s watch, Manufacturing outpaced the Service sector, thus fulfilling the “continuity” promise of Duterte’s economic managers. But into the first half of his watch, the economy seemed to revert to business-as-usual. This was even before the COVID-19 pandemic which only worsened the outlook for the economy and the reduction of poverty.

Yes, PNoy looks like a wimp in comparison to his successor. But only time will tell how PNoy’s “mission accomplished” will compare in terms of measurable performance. From where we stand in mid-2021, we should be grateful if Duterte’s watch will manage to match the Wimp’s.