Can we be poverty-free at all?

"What conditions will allow us to become a prosperous middle-class country free of poverty by 2040?"

By Ernesto M. Hilario

Successive administrations have vowed to reduce poverty incidence in the country, with results that can best be described as less than salutary.

And this raises the question: Can we reach that level of development where we can definitely say that at the very least, we have managed to eliminate extreme poverty and created a strong middle class?

For the World Bank, the answer lies in sustaining higher productivity growth.

In a recent study titled “Growth and Productivity in the Philippines: Winning the Future”, the WB said the more efficiently the country can use its resources—human capital, natural resources, machines, technology, knowledge—the better chances we will have to generate high-paying jobs and reduce poverty.

The report emphasizes that our ability to sustain our current high growth rate will depend primarily on two factors: accelerated investment in physical infrastructure, and better use of capital, labor, and technology to increase productivity.

What conditions will allow the country to become a prosperous middle-class country free of poverty by 2040?

First, we will have to triple income per capita in the next two decades. That will require an annual average growth rate of 6.5 percent in the next 22 years, or better than our average growth rate of 5.3 percent since 2000.

And second, we will have to remove constraints affecting the country’s entrepreneurs, potential investors, farmers, and other producers. These constraints include low domestic and foreign competition, especially in key sectors like telecommunications, transport, and electricity; regulations that stifle entrepreneurship and small and medium-enterprises; and restrictions on foreign participation in the economy.

We should also strive to create a level playing field and simplify business regulations so that more enterprises will be encouraged to enter the market and invest, grow and innovate, the WB said.

No doubt these are sound proposals that the Duterte administration’s economic managers should take into serious consideration if we really want to win the war against poverty in the years ahead.

Demographic dividend

From another direction, this time the National Economic and Development Authority (Neda), we’re told that also crucial to the country’s sustained growth is a concerted effort by government agencies and the private sector towards attaining and maximizing the demographic dividend.

The demographic dividend refers to the transition that takes place when birth and mortality rates decline, and the government spends less on the needs of the youngest and oldest age groups in the country, allowing the country to use its resources for investment in economic development and family welfare.

It is not only the population per se that the government must work on but its quality. Studies show that workers’ population growth has a positive and significant impact on economic growth.

In other words, the higher our working age population, the faster our economic growth will be.

Socioeconomic Planning Secretary Ernesto Pernia is correct in pointing out that the government must ensure the full implementation of the Responsible Parenthood and Reproductive Health or simply RH Law for the country to reach its demographic dividend period by 2022 to 2025. It will also translate to lower poverty incidence.

Data from the Philippine Statistics Authority show that our total fertility rate is at 2.7 births per woman in 2017. This indicates that we are already behind our neighbors, such as Thailand, Indonesia and Vietnam, in terms of reaching the demographic dividend period.

This is alarming, the Neda chief says, because “we are really late in the ballgame.”

The full implementation of the RH Law could accelerate the push towards the demographic dividend period as it may lead to what is really necessary: To lower the country’s fertility rate.

The full implementation of the RH law will bring down the unmet need for family planning in the country.

The ideal situation is for the country to substantially reduce the fertility rate, preferably to zero. The government must therefore be aggressive in implementing the RH law by providing better access to family planning services and contraceptives.

Pernia is on the right track in saying that the government must educate Filipinos on the benefits of planning and managing families: “The fewer the children, the easier to invest in all of them and give them good education.”

There’s yet another benefit from the full implementation of the RH Law, especially at the local level: our poverty incidence can be brought down to as low as nine percent, according to experts. As of now, the Duterte administration targets to bring down poverty incidence from 21.6 percent in 2015 to 14 percent by the end of its term in 2022, or a reduction of 7.6 percent. If the next administration can further whittle down that rate to nine percent, then we can lift more Filipinos from debilitating poverty. 

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