Public Sector Employment and Anti-Corruption: Key to Philippine Poverty Reduction This article is an attempt to present why there

is no significant poverty reduction in the country despite high economic growth and big improvement in the corruption perception index. I. Background

1. The Investopedia explains that there are many countries around the world that are either capitalist or socialist, with countries ranging from the United States to Cuba being referred to as mixed economies. A capitalist system is based on private ownership, labor, personal profit and investments. In contrast, a socialist economy is controlled and regulated publicly, usually through mechanisms like government bodies and planning councils. The Philippines is an underdeveloped capitalist country attempting to become more advanced 2. The Philippine government just like any government in the world is composed of the legislative, executive and judicial branches wherein each branch checks and balances the other two branches. Government management which is guided by the Constitution, laws and policies has established systems linking government, business and civil society. 3. Governance includes the following fields: political, economic, social and environmental. The countrys development includes the agricultural, industrial and service sectors. 4. The Philippines is lagging behind its neighboring countries in terms of poverty reduction. Under the Aquino administration that promotes good governance that is centered on anticorruption drive, the annual average GDP growth rate during 2010-2012 was 5.9 percent as compared with the past administrations 2008-2010 average growth rate of 4.3 percent, but poverty reduction has been less than 1 percent. . 5. The main reason for high economic growth with low poverty reduction is the fact that the countrys economic growth is driven by the service sector despite the fact that the agricultural and industrial (manufacturing) sectors are not yet fully developed. Since majority of the countrys population relies on agriculture as the main source of livelihood, the farmers and fisherfolk have the highest population poverty incidence. 6. The land reform program and the fishery sector program undertaken by the government are not enough measures to lift the farmers and fisherfolk out poverty. While the intention of said programs is good, the government manpower under a streamlined Department of Agriculture and its Bureau of Fisheries and Aquatic Resources is inadequate to deliver the required basic social and technical services to the people, particularly the beneficiaries. 7. Based on Wikipedia, on January 22, 2008, Karina Constantino-David stated that 40% of 3,000 government officials, including Cabinet officials, are unqualified to hold their positions: "these officials, consisting of managers, directors, assistant secretaries and undersecretaries, do not have the appropriate educational background and skills to perform their duties well; they don't have the correct educational skills and appropriate background plus experience to perform their respective duties well. One particular example is that a regional office and a provincial

office of BFAR are headed by a graduate of veterinary and not fisheries. 8. Management has four functions: planning, organizing, directing and control. In terms of socio-economic project management, there are 4 elements of success: market (products and services), technology, management and funding. While planning, market (products and services), technology, management and funding are well presented in both programs, the organizing, directing and control are inadequate in view of the manpower problem in terms of both the quantity and quality. II. Empirical Data

1. Graph 1 shows that there is a strong negative linear relationship between the corruption perception index (CPI) and population poverty incidence (PPI). This means that as the CPI increases, the PPI decreases. Graph 1. Relationship between corruption and poverty

Data Source: Internet articles

2. Pres. Aquinos campaign against corruption has resulted in the improvement of the CPI from 24 (2010) to 34 (2012) or a 10 percent increase. But there was an improvement in the population poverty incidence by only 0.9 percent from 28.8 percent in mid-2006 to 27.9 percent in mid-2012. 3. Graph 1 also shows that there are countries like Vietnam, Indonesia and Egypt which have lower CPI than that of the Philippines but have much lower population poverty incidence than that of the latter. This indicates that the governments anti-corruption drive, although successful, is not enough to make significant improvement in poverty situation. 4. Graph 2 shows that there is a strong negative linear relationship between the ratio of public sector employment and population poverty incidence. This means that as the ratio increases which is true to country or countries which are transformed from developing to developing status, the population poverty incidence decreases. . Graph 2. Relationship between public sector employment and poverty

Data Source: Internet articles

5. The Philippines has 1.5 percent ratio of public sector employment to total population with corresponding population poverty incidence of 26.5 percent (as of 2009).

6. Graph 2 above shows that given the countrys ratio of the total public sector employment to total population at 1.5 percent, the values of the countrys CPI and population poverty incidence are 34 and 26.5 percent, respectively, which do not deviate much from the regression lines. Countries with ratios of more than 1.5 percent such as Laos (1.6), Fiji (1.7) and Timor Leste (1.9) do not even have population poverty incidence lower than that of the Philippines, except for Laos (26 percent). In order to attain population poverty incidence of more or less 14.2 percent it requires a higher ratio of public sector employment of at least 2 percent and 3.2 percent as in the case of Indonesia and Chile with population poverty incidence of 12.5 percent and 15.1 percent, respectively. 7. Graph 2 above also shows that the Philippines and Ghana have the same ratio 1.5 percent of public sector employment to total population with almost the same population poverty incidence of 26.5 percent and 26 percent, respectively. An article stated that Ghana witnessed decent economic growth in the last three decades of implementing neoliberal policy prescriptions. Indeed, this growth promoted it to a low middle income country in 2010. Paradoxically, the wellbeing of most Ghanaians in the subaltern classes has not improved significantly, and they still suffer grinding poverty. How to understand this paradox of growth without development? This paper argues that the failure of Ghana to diversify its economy into industrialization, particularly manufacturing, explains the paradox. With its relatively good politics and open economy, the Ghanaian state should spearhead industrialization, as South Korea and Malaysia did, by supporting selective manufacturing firms with capital, technology, and protective tariffs. This is also the case of the Philippines. Graph 3. Relationship between the Ratio of Public Sector Employment and Corruption

Data Source: Internet articles

8. Graph 3 above shows that there is very strong positive linear relationship between the public sector employment to total population and corruption perception index. This means that

as said ratio increases, the corruption perception index (CPI) improves or increases. Therefore, it is a must on the part of the Aquino administration to take pragmatic approach to increasing the quantity and quality of the public sector employment to the desired level. 9. But the rate of increase in CPI varies among countries. Burma whose ratio is 37 percent which is higher than the Philippines 34 percent has CPI score of only 15 compared to the latters score of 34. This is attributed to the relative ineffectiveness and inefficiency of Burmas bureaucracy, a situation which inevitably leads to corruption just like the country Priority Development Assistance Fund (PDAF) scam. There is an internet article which stated that Corruption is endemic in Burma. Many economists and business people consider corruption the most serious barrier to investment and commerce in Burma. Due to a complex and capricious regulatory/legal environment and extremely low government salaries, rent-seeking activities are ubiquitous. From the smallest transactions to the largest, little can be accomplished without paying bribes. Hence, Burmas population poverty incidence remains high at 32.7 percent despite its higher level of public sector employment than that of the Philippines. 10. Graph 4 below shows that Ghana and Philippines have the same ratio of population

Graph 4. Relationship between Ratio of Public Sector Employment, Poverty and Corruption

Data Source: Internet articles

poverty incidence of 1.5 but the former has higher CPI score of 39 while the latter has only 34 but their population poverty incidence are almost the same at 26.5 and 26 percent, respectively.

This could mean that even if the Aquino administration will be able to improve further its CPI from 34 to 39, there could be not much improvement in the level of poverty. This only points to the reality of the need to engage both in the campaign against corruption and making the bureaucracy become effective and efficient by increasing the ratio of public sector employment to total population comparable to that of Indonesia with ratio of 2 or even higher as desired. III. Pragmatic Approach

1. The anti-corruption campaign of the Aquino administration has improved the countrys score in the CPI from score of 24 in 2010 to 34 in 2012. This led to the exposure of the extent of corruption as in the case of the PDAF scam which is said to be just an the tip of the iceberg in the extent of corruption in the country. 2. In order to ensure the significant reduction in the countrys population poverty incidence from 26.5 percent in 2009 to 14.2 percent which is one of the millennium development goals under the Aquino administration, there is a need to undertake not only improving the population perception index but also increasing the ratio of public sector employment to total population, coupled with capacity building measures. The agriculture sector that covers both the farmer and fisherfolk sectors is in dire need of technical services in order to expand the areas for farming and fish culture and increase productivity within the framework of sustainable development. Prepared by: Edmundo Enderez