What ails Philippine economy?

This is timely to ask those aspiring to be senators: Do they know what’s really ailing the Philippine economy and what would be their solutions should they become senators?

In Asian Productivity Organization Data book of 2015 report, the Philippines showed  per capita worker productivity of around $9 in 1970 and after 45 years in 2015, had $16 per worker, or short of doubling the rate after almost 5 decades, which translates to a mere 2% annual productivity increase.  Now, compare this to China’s.

China started with $1 per worker in 1970, way below the Philippines’ productivity index of $9. By 2015, China’s per capita went to $23, an increase of 2300%, or a growth of 50%, annually. China in 1970 was considered underdeveloped, where the working conditions of government-controlled labor force became the subject of critiques in societies that bannered Communism as a failed economic alternative to free market. Today, China has become the superpower in the Pacific rim and now the source of development funding to Asian nations with its internally funded Silk and Belt Road, akin to the World Bank. The Philippines is now looking to China to finance massive infrastructures.

Take a somewhat different example in that Study of the case of Singapore. Singapore, unlike China, was already a developed economy in 1970 as it topped worker’s productivity then with $36 per capita. Instead of just maintaining that productivity level it further showed an increase of 400% over 45 years ending with  $123 per capita in 2015, or 10% annual productivity growth!

These sets of APO data are worrisome to an ordinary Filipino like me and, perhaps, should bedevil the country’s economic planners to determine what’s wrong. The reality seems to me that the country’s development may just continue to be retarded in the next 2 decades or so, unless this dismal productivity trend is determined and arrested; we can be in for more serious social dislocations with more mouths to feed and a problematic productivity culture. The latest statistics on population of the country in relation to its working force show that we are facing in 2020 around 110 million Filipinos, 60 million able-bodied 15 years old and above, and an employed force of 40 million, more or less.  2 to 3 million will be unemployed.

Increasing minimum wages without productivity merely puts more pesos in the pocket to buy the same quantity of goods and services. When there are no incremental revenues, increasing the fixed cost of businesses in wage budgets, plus more indirect taxes to boot, could either result in retrenchment and worse, business closure.  LABSTAT, the  research paper of the Philippine Statistics Authority (PSA) reported in May 2018 that in 2015 2,448 establishments were reported to have Productivity Incentives Programs (PIP) for their employees. 75% were the initiatives of Management. What is striking in this PSA report is that 63% of these companies did not receive any assistance for their programs from government agencies; the initiatives were totally their own. Considering that there were 915,726 establishments in the Philippines in 2016 as reported by the PSA it appears that less than 3% of these establishments had productivity incentives programs for their workers. So, how can we ever expect improved productivity?

There is an existing law, R.A. 6791, known as The Productivity Incentives Act of 1990 that gives incentive to establishments that give productivity bonuses to their employees. The incentive is in the form of a deduction from taxable revenues equivalent 50% of bonuses given and some deductions for productivity training programs. This frankly begs the question: What is there to deduct when there is no incremental productivity and, hence, no bonus given to the workers? The law does not address the root cause of the problem which is the lack of productivity.  As shown in the LABSTAT data it is management that has so far taken the initiative to have a productivity program, without government support.  Very few other companies, except those which already have adopted productivity incentives programs, have taken advantage of the benefits of the law. In fact, many of the provisions of R.A. 6791 impose reportorial requirements to avail of the “benefits”, an  unwanted and unnecessary bureaucratic nightmare which do not give encouragement to business at all.

R.A. 6791 urgently needs to be amended and given the right focus!

What businesses need are specifically availability of Soft loans to be able to build and acquire machine and facilities for productivity, educational programs to promote team productivity in the work place. Together with the leaders of business, government agencies concerned should work on laws and policies that actually promote productivity. The Filipino can be more productive than he is used to. 

The Asian Productivity Organization report shows that  our workers have not been productive enough for the past five decades. The rate of workers annual productivity of 2% is strikingly similar to our annual population growth, which by simple arithmetic means they cancel out each other and we might just be lucky to be on survival mode for a long time. — MARVEL K. TAN, Quezon City