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The Philippines’ Uneven Economic Boom

Submitted by on September 6, 2013 – 9:41 am 11 Comments |  
Philippines Regions MapFor decades, the Philippines has been noted for its economic failures. Fifty years ago, it was ahead of South Korea on most economic indicators, and its relatively high levels of education and public health seemingly indicated a bright future. Misrule, corruption, and missed opportunities, however, took a heavy toll, as did a persistently high birthrate, leading many observers to dub the Philippines the “sick man of Asia.” As a result of such problems, the Philippines has had to export much of its labor force. Currently, more than 9 million Filipinos work abroad, many of whom (particularly nurses) are highly educated.

Over the past several years, however, the Philippine economy has regained its health, registering rapid expansion just as its neighbors have slumped. In the second quarter of 2013, the Philippine economy grew at an annual rate of 7.5 percent, roughly equal to that of China and far surpassing Indonesia (5.8 percent) Vietnam (5 percent), Malaysia (4.3 percent), and Thailand (2.8 percent). Current economic expansion, moreover, seems relatively well balanced, with strong gains in manufacturing, construction, and services. Business-processing outsourcing, however, has been the strongest sector.

But if the Philippine economy has been doing well of late, the country still faces enormous challenges. Poverty remains deep and widespread, and many Filipinos cannot find work. In the outsourcing boom, fairly high skill levels are generally required. Many experts think that infrastructural investments and gains in basic manufacturing will be necessary before broad-based employment growth can be realized.

Philippines per capita GDP mapRegardless of the country’s prospects, it is clear that economic development in the Philippines remains very geographically uneven, as is the case in most developing countries. In terms of per capita gross domestic product, the country’s richest region enjoys more than a ten-fold advantage over its poorest region, as is evident in the map posted to the left.* By far the most prosperous part of the country is the National Capital Region, roughly comprising Metro Manila, the Philippines’ primate city. Although Manila is infamous for its vast and dismal slums—recently depicted by a well-known novelist as the very “gates of Hell”—the city actually has much less poverty than most other parts of the country, as can be seen on the map below. (It must be noted that the threshold for poverty in the Philippines is set at a very low level.) It is thus understandable why Metro Manila continues to mushroom, despite its inadequate infrastructure and appalling pollution.

Phlippines Poverty MapSome intriguing geographical patterns are evident in these maps. The poverty map shows a clear north/south divide, with Luzon vastly out-performing the southern island of Mindanao. In Luzon, the broad central zone around Manila shares to some extent the capital’s relatively high standing, particularly in regard to poverty. The southern Tagalog region (now known by the acronym CALABARZON), noted for its fertile volcanic soils and mid-sized manufacturing cities, clearly stands out on the per capita GDP map.

Two of Luzon’s regions demand more careful consideration. Southeastern Bikol lags well back, despite its relatively productive agricultural basis. Yet in the early 20th century, Bikol was among the most economically vibrant parts of the Philippines, based on its export of Manila hemp, or abacá (derived from the fibers of a plant closely related to the banana, and giving us the term “Manila envelope”). But as historian Norman Owens has shown, the abacá industry failed to generate sustainable economic development, and when it collapsed so did the regional economy. Relatively speaking, Bikol has never recovered.

Philippiones Economic Growth MapLuzon’s other oddity on GDP map is the mountainous Cordilleran region, which posts the country’s second highest level of per capita production. Not only is the Cordillera a rugged area with limited infrastructure, it is also mostly inhabited by so-called tribal peoples, members of ethnic groups that were not Christianized under Spanish rule. Such conditions would in general lead one to expect subsistence-oriented economies with low per capita GDP and widespread poverty. But the Cordillera also includes Baguio City, the high-elevation resort city favored by the Philippine elite, as well as the mining and temperate-vegetable-growing districts of Benguet Province (discussed in my book, Wagering the Land). Like the Philippines as a whole, the Cordillera is characterized by profound economic disparities.

The island of Mindanao in the far south also contains some interesting discrepancies. Although the entire island has high levels of poverty, its north-central and southeastern regions are fairly productive in economic terms. The Philippine’s fastest growing economies are also found in Mindanao, particularly the far west (Zamboanga) and the northeast (Caraga). The key factor here seem to be export-oriented, plantation-based agriculture, focused on such high-value crops as pineapples (the Philippines is the world’s leading pineapple producer by a healthy margin). Mindanao is now responsible for some 60 percent of Philippine agricultural exports. Plantation-based agriculture, however, is often noted for its failure to alleviate poverty even where it does generate substantial economic gains.

On all three economic maps posted here, one region stands out for its poverty and lack of economic development: the Autonomous Region in Muslim Mindanao (which is in the process of being renamed Bangsamoro). The prolonged insurgency here both reflects and has deepened its entrenched economic distress. Although some observers think that peace may be at hand as a result of a 2012 agreement between the government and the Moro Islamic Liberation Front, others are not so optimistic. As recently as August of this year, some 2,000 people were forced to flee their homes in Mindanao due to fighting between the Philippine military and the breakaway rebel group that calls itself the Bangsamoro Islamic Freedom Fighters.

*In the United States, by contrast, the per capita GDP difference between the least productive (Mississippi) and most productive (Delaware) state is a little more than two-fold: $33,000 to $70,000.

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  • TimUpham

    There are 10 endangered languages spoken in the Philippines. One of the most critical is Aeta. Many of the Aeta have been moved to urban environments, where the eke out a living selling handicrafts to tourists. The Aeta are believed to be the first inhabitants of the Philippine archipelagos.

    • Asya Pereltsvaig

      There’s actually more endangered languages than that. The Ethnologue lists 23 as either “in trouble” or “dying”…

      • TimUpham

        In trouble can have various meanings. Such as you can say Breton is in trouble, but is it indeed a dying language. It is not as widespread spoken in Brittany, but great efforts are being used to maintain it in western Brittany.

        • Asya Pereltsvaig

          Well, “endagered” doesn’t mean “dying”. It’s a wider category. The UNESCO classification subsumes “vulnerable” under “endagered”, as well as “dying”.

    • Martin W. Lewis

      The story of the Aeta and related “Negritio” populations is extremely tragic. According to the Wikipedia, their average life expectancy at birth is 16.5 years, and of those who do reach adulthood, the average age at death is 27.3 years. See,

      • TimUpham

        Instilling pride in indigenous peoples is by keeping their language alive. All their lore and customs are locked up in that language. I learned so much about Native Americans, by transcribing their language, and explaining its meaning. It must be done with other indigenous peoples, and 95% of the endangered languages in the world, are that of indigenous peoples. Simple, language survival is a HUMAN RIGHT, and the center of the work by Cultural Survival.

        • Asya Pereltsvaig

          But having access to education and more/better economic opportunities via speaking the language of the majority is also a right that many people who oppose language shift deny those indigenous folks who speak endangered languages. I am not saying that linguistic/cultural diversity is a bad thing, only that the issue is more complex and that languages become endangered for a reason, and not a linguistic one per se.

          • TimUpham

            They now have language immersion programs on reservation schools in the United States. With these programs, these students are using English better, and a higher percentage are going onto advanced education. When I talked to Australian educators, they told me that education is strictly done on a state and territorial level. There is no federal structure at all. The new state government in Western Australia is greatly cutting back on education for Aboriginal children.

  • asusina

    “Fifty years ago, it was ahead of South Korea on most economic indicators, and its relatively high levels of education and public health seemingly indicated a bright future.”

    The key word here is “seemingly.”

    The only reason the Philippine economic indicators seemed better than those of South Korea fifty years ago was because the Philippine economy was so closely linked to that of the world’s newest superpower, the United States.

    After World War 2, the US congress enacted the Bell Trade Act. This made any US payment of war damages to the Philippines contingent upon the Philippines not developing any industry that might compete with American industries, pegging its peso to the mighty US dollar (Php₱2 to US$1) and giving rights to US citizens equal to Philippine citizens in exploiting Philippine natural resources, among many things.

    This allowed US-made goods to become relatively more affordable in the Philippines than anywhere else in Asia. This also allowed many Filipinos to be employed by American mining companies, even if most of the profits went back to America. This agreement also gave traditional Philippine crops such as coconuts, bananas, rice and sugar a market in the US, as long as they did not compete with any crops that US farmers were harvesting.

    It meant that the Philippines could rely on its very strong peso, the exploitation of its mines, its coconuts, rice, bananas and sugar crops to give the impression that its economy was doing alright without the country needing to industrialize.

    Meanwhile, Japan recovered from World War 2 with billions of dollars in US aid without limitations to what industries it can redevelop. The strong Philippine peso meant it was cheaper just to import very cheap Japanese-made electronic and automotive goods, rather than setting up competeing manufacturing companies in the Philippines.

    When it was time for Japan to find cheaper places to manufacture its goods, the strong peso discouraged Japanese companies from building factories in the Philippines. Japanese companies established manufacturing facilities in South Korea and Taiwan, instead.

    Even after the Bell Trade Act was replaced by the Laurel Langley Agreement in the mid-50s, the strong Philippine peso made it more
    affordable for Filipino businesses to just import stuff rather than to
    industrialize. When Japanese, South Korean and Taiwanese companies later needed to find cheaper countries from which to manufacture their wares, they went to Thailand, Malaysia, Indonesia. And when the PRC opened its doors to foreign investment from the west, the Philippines became virtually economically irrelevant.

    Without heavy industries, there was no sustainable system to keep generations of Filipinos productively employed. Up to now, the Philippine economy is propped up by the remittances from overseas contract workers who daily toil far, far away from their family and loved ones. Meanwhile, South Korea, Taiwan, Thailand and Malaysia now have solid industrial and technological resources to keep their citizens gainfully employed without needing to be exported as cheap labor and be exploited by unscrupulous bosses abroad.

    Thankfully, the Philippine peso is now competitive enough to attract foreign investors in helping develop the Philippine manufacturing, commercial and technological sectors.

    Hopefully, this will mean more jobs becoming available to Filipinos without needing to leave their homeland in the near future. Hopefully, the Philippine government will not leave this to chance and deliberately institute programs and incentives for Filipino entrepreneurs to set up industries throughout the
    archipelago. Hopefully, the Philippines can deliberately support
    Philippine-made products, prioritzing them over imports.

    Imagine if the Philippines deliberately prioritized locally-designed and -made ships, frigates, aircraft, uniforms, computers, cars, trucks, etc. in its government procurement programs—just as its constitution stipulates.

    Imagine if the Philippine government offered loans to other countries, under the stipulation that such loans be used to procure Philippine-made products and utilize Philippine-based services. Imagine if the Philippines invested in licenses to manufacture locally, the very products that it currently imports most regularly.

    Imagine jobs in the most impoverished provinces to help dissuade the marginalized poor from resorting to insurgency and brigandry. Imagine the Philippines’ best and brightest being gainfully employed in their own country without having to resort to graft and corruption.

    This is the Philippine Dream that must become reality, if generations of Filipinos are to have any hope in the future.

    • imjinah

      “Thankfully, the Philippine peso is now competitive enough to attract foreign investors in helping develop the Philippine manufacturing, commercial and technological sectors.”

      I don’t see this as the sole factor for the Philippine economy to be attractive or even sustainable. What the country needs for long-term development and for wealth to gradually trickle to most if not all Filipino families is reduction of regulations, removal of irrational nationalism-rationalized protectionism and federalism.

      Currency can only do much. It’s a basis of trade, but does not create a sweeping impact. We can weather a weak currency versus the dollar by a strong domestic consumption coupled with a vibrant competitive local market. We can’t hold long enough if these self-aggrandizing locally-owned companies keep on crapping on the people just because the Constitution is protecting them from competition against interested foreign companies who can offer cheaper and much more efficient goods and services.

  • imjinah

    The root problem of this is our unitarian government which has been long perverted. Add insult to injury, it’s incompatible to a very multiethnic country like the Philippines.

    You can see that much of Luzon except the Bikol region has relatively lower poverty incidence. Economic development in the peripheries most especially in provinces/regions beyond the adjacencies of long-standing economic-political center Metro Manila was stifled due to geography aside from a draconian bureaucratic system.