In his fourth State of the Nation Address before a joint sitting of Congress, President Noynoy Aquino made reference to inclusive growth, inclusive progress or broad-based growth about thrice in his hour-and-a-half-long speech, but he mentioned the words transformation 15 times, change 14 times and reform 11 times. At the midpoint of his term, PNoy sought to bring home the message that change in the culture of “wang-wang” which he coined in his inaugural state of the nation address has taken place under his watch and that as a result of the reforms he instituted, the path for providing opportunity to all has been opened up irrevocably.
Inclusive growth as he declared in his speech was about providing everyone the chance to have a go at life, what the Australians call “a fair go”, which constitutes a social contract that if you work hard at bettering yourself, you can move ahead in life. It is not about guaranteeing the same outcome, however, meaning it is up to the individual whether to take advantage of the opportunities presented, or not. Providing equal opportunity means building human capabilities to pursue “the good life”.
The Asian Development Bank has come up with a Framework for Inclusive Growth which provides a set of indicators for measuring whether governments and societies develop that basic level of capacity in its people. The framework is comprised of three pillars: the first one supports economic growth to expand opportunity, the second one supports social inclusion to provide equal access to economic opportunity, and the third supports social safety nets for those who slip through the cracks. There are a number of indicators for each pillar.
I have sampled a few and collated the results for the Philippines and six other emerging economies from our region to compare the different paths we have taken down the road of inclusive growth and development. Let me start with the most basic one: income or the lack of it. Having a decent level of income is one of the most basic measures of material well-being. Social disadvantage comes from not having income sufficient to live on. The following chart shows the proportion of people living on less than $2 a day for us and our Asian neighbours at the start of the 90s and the end of the noughties.
At the start of the 90s, Vietnam had the highest rate of poverty at 85.7%, followed by China and Indonesia which were each at 84.6%, India at 81.7%, the Philippines at 55.4%, Thailand at 37.1% and Malaysia at 11.2%. By the end of the noughties, India had the highest poverty rate at 68.7%, followed by Indonesia at 46.1%, Vietnam at 43.4%, the Philippines at 41.5%, China (29%.8%), Thailand (4.6%) and Malaysia (2.3%). In percentage terms the countries that had the largest decline of poverty was Thailand which saw a drop of 88%, followed by Malaysia (-79%), China (-65%), Vietnam (-49%) and Indonesia (-46%).
The Philippines and India saw the least amount of poverty reduction at -25% and -16% respectively from their initial states. Despite the periods of rapid growth that both these countries experienced during the past two decades, the relative insensitivity of their poverty rates to growth is a bit disconcerting.
The most important predictor of future income is of course the amount of schooling one receives. This is best measured by the years of schooling a person achieves by a certain age. The following chart shows the average total schooling for youth aged 15-24 at the start of the 90s and end of the noughties for the same set of countries.
At the start of the 90s, Malaysia and the Philippines recorded the highest totals with 10.2 years and 8.1 years for each of them respectively. China (7.6 years) and Thailand (7.2 years) came next, followed by Indonesia (6.5 years), India (4.6 years) and Vietnam (4.5 years). Two decades later and Malaysia retained the top spot with 12 years on average, but China with 10.9 years overtook Thailand (10.6 years) and the Philippines (9.7 years). Vietnam nearly doubled its number of years to 8.8 overtaking Indonesia (7.7 years) and India (7.1 years). Vietnam succeeded the most in this area lifting the average years of schooling by 4.3 years, followed by Thailand (3.4 years) and China (3.3 years). India lifted its average by 2.5 years, followed by Malaysia (1.8 years), the Philippines (1.6 years) and Indonesia (1.2 years).
The Philippines which started out as first runner up has been relegated to fourth in ranking among these seven countries with Vietnam closing in. The high tech industries of the Philippines and India demand college educated workers. This means that good employment opportunities in these two countries are available only to a few. To be able to perform well at school, children need adequate nutrition.
When people suffer starvation at a young age, it affects their future prospects in life. Malnourished children suffer learning difficulties as their mental development is set back. The prevalence of underweight children under five years becomes a significant predictor of future misery. The following chart depicts this for the same set of countries.
At the start of the 90s, the highest levels of malnourishment were found in India with 52.8% of children underweight, Vietnam with 36.9%, the Philippines with 29.9% and Indonesia with 29.8%. They were followed by Malaysia (22.1%), Thailand (16.3%) and China (12.6%). At the end of the noughties, India still had the worst result at 43.5% followed by the Philippines (20.7%), Vietnam (20.2%), Indonesia (17.9%), Malaysia (12.9%), Thailand (7%) and China (3.4%).
Both India and the Philippines saw their prevalence drop the least in percentage terms by 18% and 31% respectively, while China and Thailand saw it drop the most by 73% and 57%. The huge disparity of income in India and the Philippines is the main cause of their underperformance.
Finally, how can an individual seek human well-being if he or she does not even survive early childhood. The under-five mortality rate provides an indication of the quality of health care provided to mothers during pregnancy and children at the very start of their lives. The following chart shows the number of deaths per 1,000 live births across the same sample of countries.
At the start of the 90s, India had the highest rate of child mortality at 115 deaths per 1,000 live births, followed by Indonesia with 85, the Philippines with 59, Vietnam with 51, China with 48, Thailand with 32 and Malaysia with 18. By the end of the noughties, the mortality rate in India dropped to 63, while in Indonesia it fell to 35, likewise in the Philippines to 29, Vietnam to 23, China to 18, Thailand to 13 and Malaysia to 6. In percentage terms Malaysia saw the largest drop at 67% followed by China at 63%. India saw the slowest reduction at 45% followed by the Philippines at 51%.
These figures provide a good baseline for measuring inclusiveness within these countries. There are more indicators provided by the ADB, but these form the core set for anyone interested in studying inclusive growth. The Philippines seems to be in the same situation as India, in that they both experience the slowest reduction of social disadvantage among these countries–social disadvantage which is experienced at the very beginning of life. It is for this reason that the social reforms undertaken by the government are worth noting.
In his SONA, the president announced that he would be increasing the coverage of the conditional cash transfers to four million families and the period of eligibility up until children reach the age of 18. Patterned after successful programs in Brazil and Mexico that have been around for over a decade, the program screens participants based on a multi-dimensional test of social disadvantage. It provides cash straight to them through e-cards given to the mothers to avoid the usual bureaucratic double handling. They continue to receive a monthly cash transfer if they keep their children in school, make them undergo vaccinations and receive reproductive health counselling at health centres.
Their compliance and continuing eligibility is monitored regularly by the Department of Social Welfare and Development. A recent impact evaluation conducted by the World Bank shows that the intended program objectives are being met. School enrollment and attendance and better nutrition has been observed among children of CCT participating communities compared to non-participating ones. Although the poverty rate of the Philippines did not shift significantly between 2009 and 2012, it does not mean that this program was ineffective. The intergenerational nature of this reform implies that the Philippines will begin to reap the benefits of Pantawid Pamilya six to ten years after it was instituted. That means only by 2016 and beyond will this reform’s impact be noticeable through national family income and expenditure surveys when the children of Pantawid reach the working age of 15 years.
It will be PNoy’s successor who will reap the social dividend from the expansion of this program. It is true that this reform can now be considered irreversible in the sense that it will be hard for any successive administration to retract it. The only way to phase it out would be to make it obsolete by reducing the number of poor households. Although the president inherited the program from his predecessor, he can claim credit for rapidly expanding it. The other reforms which the administration instituted, such as closing the classroom gap, the sin tax law, expanding affordable healthcare, offering rent subsidies to informal settlers and the reproductive health act could also reap benefits for successive administrations.
What is disconcerting is how many Filipinos among the educated and upper socio-economic groups still oppose the reforms just mentioned, begrudging the opportunities given to the poor as mere dole outs. It is a sign of just how exclusive and inequality tolerant we have become as a society. Perhaps it isn’t any wonder why our growth has not been very inclusive so far, and why the path towards inclusive growth needs to be pursued even more vigorously by the current administration.