WB Study fo SW 122 and SW144 Students

[Posted September 1, 2010 for SW 122 & SW 144 Reading]
Philippines: Inclusive Growth Provides Stronger Platform for Competitiveness—WB Study
Study says greater efforts are needed to revive growth and improve access to education, health, and social protection, particularly among the poorest populations and in the poorest regions


Contacts:
In Manila: Dave Llorito (632) 917-3047
E-mail: dllorito@worldbank.org
Erika Lacson (632) 917-3013
E-mail: elacson@worldbank.org
In Washington: Elisabeth Mealey (202) 458-5964
E-mail: emealey@worldbank.org

MANILA, AUGUST 19, 2010—The Philippines needs to aim for more inclusive growth that benefits the poor for the country’s march to development to become sustainable, a new World Bank study released today says.

The report titled “Philippines: Fostering More Inclusive Growth,” says that broad-based participation in the growth process remains critically important to ensure that the benefits of growth are shared by the poor and most vulnerable.“Growth that is inclusive, or growth that works for the poor, also provides a stronger platform for future expansion and competitiveness,” it says.

The study notes that acceleration of economic growth since 2001 has not translated into greater progress in poverty reduction. Instead, the poverty headcount as a share of the population is now back to where it was at the end of the 1990s.

“The failure of poverty to decline is partly explained by the limited dynamism of the growth experienced in 2000-06, coupled with income inequality,” says the study. “The income inequality has had the effect of reducing the income elasticity of poverty, slowing down the poverty reduction process.”

According to the study, several factors have contributed to the deterioration in the distribution of income and consumption. These factors include a sectoral distribution of growth that benefits the poor less than other income strata, an unequal pattern of regional development, intense demographic pressures, and an unequal access to social services and, in some cases, a decline of public spending on social services that benefit the poor.

From a sector development perspective, the main problem has been that the sector that employs the bulk of low-skilled workers (agriculture) has been growing more slowly than other sectors, while the sectors that have been contributing most to the acceleration of GDP growth after 2000 (mainly manufacturing) have been very capital-intensive and have not generated many new low skill jobs.

Says World Bank Country Director Bert Hofman during the release of the report: “More sustained and rapid growth remains a cornerstone for poverty reduction, but growth must become more inclusive through supporting policies in education, labor market, and support for sectors that generate more jobs for poor people."

To reduce poverty and build a broader base for future economic prosperity, the report recommends the implementation of a “two-pronged strategic approach” to foster more inclusive growth.

The first prong is for the country to take actions that enhance the income-earning opportunities of the poor. This encompasses actions designed to promote faster growth and employment generation, including addressing the vulnerable fiscal situation, upgrading the country’s infrastructure particularly in transport and electricity, and improving the overall investment climate.

“In terms of sectoral emphasis, the agriculture sector requires special attention since that is where most of the poor are currently engaged, together with the manufacturing and higher-productivity services sectors, which offer the most promise in terms of future income-earning opportunities,” says Mr. Ulrich Lachler, World Bank Lead Economist for the Philippines who led a team of experts that prepared the report.

The second prong of the strategic approach is to assist households to participate in markets and benefit from growth by enhancing their human capital to do so.

The study stresses that greater efforts are also needed to improve access to education, health, and social protection services, particularly among the poorest populations and in the poorest regions. Public spending in the areas of health, education, and social protection for the poor also needs to be improved.

“Judiciously increasing spending in these sectors, better targeting the programs that would benefit the poor, and improving expenditure management will play an important role in allowing the poor to benefit from growth and to participate in it in the future,” says Mr. Jehan Arulpragasam, World Bank Country Sector Coordinator for Human Development who is a co-leader of the Report. “In addition, improving accountability in service delivery will go a long way in making services more responsive to the actual needs and demands of poor households.”