World Bank: Philippines can end poverty

within a generatio
http://www.philstar.com/business/2015/01/15/1413174/world-bank-philippines-canend-poverty-within-generation
MANILA, Philippines The World Bank said yesterday the Philippines can eliminate poverty within a
generation as sustained economic growth in recent years has translated into more jobs and higher
incomes.
The bank said in a report that more than a million jobs were created between October last year and
October 2013, pulling unemployment down to a 10-year low of 6 percent.
Real incomes of the bottom 20 percent of Filipinos grew much faster than the rest of the population and
unemployment among the poor dropped. The government's program of conditional cash transfers is
effective in reaching those most in need, the report said.
Poverty has remained at high levels in the Philippines relative to some East Asian countries, reflecting a
succession of corrupt governments in past decades and the country's vulnerability to natural disasters
including typhoons.
The bank forecasts the Philippine economy will expand 6.5 percent this year, slightly down its earlier
forecast of 6.7 percent. It estimated full-year growth last year at 6 percent, down from an earlier forecast
of 6.4 percent due to slower government spending and lower farm production.
It said sustaining such high growth and accelerating reforms can lead to massive cuts in poverty and to
wealth being shared by more people. Government data shows that about a quarter of the country's 100
million people have income of less than 18,935 pesos ($1,290) a year.

"If growth is sustained at 6 percent per year and the current rate at which growth reduces poverty is
maintained, poverty could be eradicated within a single generation," said Rogier van den Brink, a World
Bank economist.
Over the long-term, if growth is sustained at 6 percent per year, per capita income can double within a
decade, grow five times in two decades, and increase 11 times in three decades, the report said.
But it said a more aggressive approach to addressing stubbornly high underemployment in required.
The report said changes needed include increasing investments in infrastructure, health and education;
enhancing competition; simplifying regulations to promote job creation and protecting property rights to
encourage more investments.

Philippines' Shallow Capitalism: Westernization Without Prosperity

http://www.huffingtonpost.com/richard-javad-heydarian/philippines-shallowcapit_b_6441868.html

As the sole Catholic-majority nation in Asia, with a distinct combination of Spanish and
American colonial past, the Philippines stands as one of the most unique countries. Yet,
many Westerners tend to find the country too familiar -- that is to say, not as "exotic" as
other neighboring countries -- precisely because of its tremendous cultural and architectural
affinity with the Western civilization, specifically the Iberian and Anglo-Saxon varieties.
Almost all Filipinos carry Spanish names, while government and educational institutions
rely on English as their primary medium of communication.
Sometimes, members of the Filipino elite tend to boast about how the Philippines is the
most Westernized country in Asia, with others openly relishing the fact that the Southeast
Asian country was carved out of Western colonial machinations and imagination. The very
name of the archipelagic country -- derived from King Philip II of Spain -- perhaps says it
all. In many ways, Filipinos share more common characteristics with, say, Latin Americans
than their immediate neighbors. (Except that most Filipinos can't speak proper Spanish,
thanks to the regrettable fact that theSpaniards never bothered to introduce universal
education in their key Asian colony. Spanish was used as a language of distinction and
exclusion rather than nation-building and collective identity.)
Ordinary Filipinos, meanwhile, also boast about the astonishing fact that the Philippines -among the poorest countries in Asia -- is home to 3 out of the 10 biggestshopping malls on
earth. And with the country (again) featuring among the fastest growing emerging markets,
there is a growing feeling that the Philippines can finally claim a place of pride among
modern and vibrant capitalist societies in Asia.
And that renewed sense of confidence is trickling down to the younger generation.
(Nowadays, it isn't hard to find youthful, ambitious Filipinos confidently expressing their
views in international conferences and gathering, especially when they seat among fellow
Asians, who happen to be less adept at English and cosmopolitan in outlook.) Ideologically,
the Philippines is largely situated in the Western episteme: Westernized lifestyles and proWestern socio-political outlooks dominate the Filipino public sphere. One sometimes
wonders whether the country has been placed in the wrong corner of the world.
A closer look at the country, however, reveals a fundamental paradox: centuries of
Westernization has not led to genuine modernization, while years of rapid economic growth
haven't brought about prosperity for the majority of the people. The country continues to
remain as a semi-feudal (especially in rural areas) society under the grip of a vicious form of

crony capitalism. Formal 'electoral democracy', in turn, provides a comfortable veneer of

legitimacy (for the political elite) and an illusion of egalitarianism in a country mired in
poverty and glaring inequality.
Premature Consumerism
Shopping malls dominate -- both physically and cognitively -- the urban landscape in the
Philippines. All key public transport systems cluster around major shopping centers, which
provide unrivaled comfort, the right temperature (in a humid, tropical country), and
breathless access to a wide range of brands that cater to all social classes.
Urban cultures pivot and are shaped by shopping malls that are often located close to
Business Process Outsourcing (BPO) companies, which employ hundreds of thousands
of yuppies, who have redefined the Filipino urban lifestyle. One can find both Prada and
Penshoppe (a local clothing brand) in major malls, with both the uber-rich and working
classes participating in a global consumerist culture, which has taken over almost all corners
of the plant. It is a classic form of faux egalitarianism. (Having visited numerous countries
across five continents, I seldom come across a product, which I can't find, often at better
prices, back in Metro Manila.)
Few steps away and one can discover new residential suites, which, similar to shopping
malls, offer a variety of options for up-and-coming urban residents, who chase modern
amenities and perfect location in a congested city like Manila or Cebu. Major cities across
the Philippines have transformed into virtual construction sites, resembling the
construction boom that have seen in places such as Dubai, Tehran, Moscow, and Shanghai
in the past decades.
More recently, even small towns and municipalities have been transformed into frontier
markets for few major conglomerates, which dominate the retail and real estate sectors in
the country. The past decade has been among the best years in terms of corporate profits
and business expansion opportunities for the country's elite, which have disproportionally
swallowed much of the recently-created growth in the economy.
Slowly but surely, the Philippines is beginning to resemble hyper-consumerist countries
such as the U.S., which have endlessly indulged in ever-increasing demand for goods and
services on the back of decades of robust industrialization, specifically during the Keynesian
era that lasted until the late-1970s, and massive borrowing from foreign creditors,
particularly export-oriented economies such as China and Japan, in the age of neo-liberal
globalization.

Today, the Philippines is simulating American-style consumerism without going through

the "valley of tears" of state-led industrial development, high rates of household saving
rates, and mass production of affordable exports -- the very factors, which allowed Newly
Industrialized Countries (NICs) such as South Korea to get out of the cycle of poverty in
recent times.
Illusion of Prosperity
The mind-boggling expansion in the Philippines' real estate sector has gone hand in hand
with the perennially disappointing absence of modern public infrastructure. There is hardly
any massive "green" public park area (think of Singapore's Botanic Gardens or New York's
Central Park), where Filipinos from all walks of life can safely and comfortably enjoy the
wonders and serenity of nature in an ocean of congestion and pollution. Public spaces are
often neglected by the authorities or vandalized by uncaring residents.
There is limited public space for (spiritual and physical) disengagement from the hustle and
bustle of everyday life. The Filipino state has basically outsourced such responsibilities to
profit-driven enterprises. And this is precisely why the shopping malls have become the core
of urban life in the Philippines. Meanwhile, shopping malls have been on the verge of
extinction in other countries, especially in the U.S., where online shopping and urban
picnics have captured the hearts and minds of many urban residents.
The Philippines, shaped by its colonial legacy, has emulated Western lifestyles and urban
architectures. But it has not truly modernized, at least in the Weberian sense.We are yet to
see truly rational, impersonal state institutions, which stand beyond patronage and
personalized politics. Even much of the business sector is dominated by few old families, so
it is preposterous to talk about "free market" competition.
The country's public infrastructure is among the least developed in Asia, while the country's
elite educational institutions have struggled to keep up with regional peers. With the
exception of the country's premiere university, the University of the Philippines, all other
top Filipino universities have been rapidly falling behind their counterparts in other parts of
Asia and the developing world.
Modernity isn't about speaking English per se -- or any global lingua franca for that matter.
It is also not about having big shopping malls, wearing global brands, and preaching liberal
socio-political values per se. Those are only manifestations of modernization, not the core of
it. Modernity, above all, is about placing efficiency, meritocracy and knowledge above
connections, patronage, and discredited traditions. This is precisely why many of the
Philippines' neighboring countries, which have held onto much of their cultural heritage,
stand as significantly more modern and prosperous: Social mobility, merit-based success,

and knowledge-intensive productivity are incredibly more visible in places such as Taiwan
or South Korea than the Philippines.
More importantly, the Philippines' rapid rates of economic growth in recent yearshaven't
brought about an egalitarian, modern form of capitalism, which is capable of generating
waves of prosperity that lift all the boats regardless of gender, class, and ethnicity. Low-end
services and speculative sectors such as real estate have been the backbone of recent
economic growth, with multi-billion remittances from Overseas Filipino Workers (OFWs)
fuelling domestic consumption.

The tremendous lack of inclusive growth in the country is a reflection of the absence of
modern state institutions, which can efficiently provide public services and regulate
overweening markets; the lack of investment in Research and Development (R&D) across
educational and corporate institutions; and a centuries-old tradition of patronage-politics as
well as feudal economic institutions in rural areas, which have kept millions of Filipinos
from realizing their great potentials.
Perhaps it is time for the Filipino elite to rediscover the true meaning of modernity,
democracy, and progress. And for the wider population to fight for genuine prosperity.

Philippines: High and Inclusive Growth Can Eradicate

Poverty and Boost Shared Prosperity within a
Generation World Bank
http://www.worldbank.org/en/news/press-release/2015/01/13/philippines-high-andinclusive-growth-can-eradicate-poverty-and-boost-shared-prosperity-within-ageneration

MANILA, JANUARY 14, 2015 The World Bank expects the Philippine economy to grow at 6.5 percent
in 2015 and 2016 despite a weak global economy. Sustaining this level of high growth and making it
inclusive over the long term will enable the country to eradicate poverty and boost shared prosperity
within a generation.

This is the main message of the World Banks latest Philippine Economic Update (PEU), released
today with the theme Making Growth Work for the Poor.
The Philippines has what it takes to sustain this high level of growth for many years, saidWorld Bank
Country Director Motoo Konishi. The country is benefiting from low and stable inflation, its finances
are healthy, and debt levels are declining. It has a dynamic private sector that is seizing global
opportunities. Now is the time to move the economy decisively onto a path that reduces poverty and
creates more and better jobs.
The World Bank revised its forecast for 2014 to 6.0 percent from 6.4 percent, owing to slower government
spending and lower farm production, but expects growth to bounce back in 2015 and 2016. The country
can even grow beyond 6.5 percent if the government can fully utilize its budget as planned and accelerate
reforms, the report says.
It also says that sustained growth in recent years has started to translate into gains in job creation and
improvement in the lives of the poor.
More than a million jobs were created in October from the same month the previous year. Unemployment
fell from 6.4 percent a year ago to 6 percent, the lowest figure in 10 years. Government data also shows
that the real wage income of the poorest 20 percent of the population grew by almost 10 percent
compared to only 2.4 percent for the upper 80 percent, while underemployment among the poor declined
significantly in 2013, coinciding with the improvement in poverty incidence.
If growth is sustained at 6 percent per year and the current rate at which growth reduces poverty is
maintained, poverty could be eradicated within a single generation, said World Bank Lead Economist
Rogier van den Brink.
Achieving this goal will require sustaining and speeding up structural reforms, the report says. Key reform
areas are:
Increasing investments in infrastructure, health, and education;
Enhancing competition to level the playing field;
Making regulations simpler to promote job creation, especially for micro and small enterprises; and,

 Protecting property rights.

Over the medium-term, putting more money in infrastructure as well as in peoples education and health
will require tax reforms to generate adequate resources. The report highly recommends rationalizing tax
incentives by making them more targeted, transparent, performance-based and temporary, as well as
adjusting tax rates and valuations to keep pace with inflation so that the tax system becomes more
equitable.
Karl Kendrick Chua, World Bank Senior Country Economist, said both tax administration and tax
policy reforms are needed to generate the revenues required to finance the decades-old investment
deficit in infrastructure, health and education. Only when revenues improve should policy makers consider
further reforms, such as lowering the top marginal income tax rate to 25 percent, reducing the gap
between regular and special corporate income tax rates, and simplifying the tax system for micro and
small enterprises, he said.
For these reforms to succeed, strengthening tax administration and improving transparency and
accountability of government spending are essential, Chua said. These would allow the Filipino people
to see a better link between taxes and services and convince them that the taxes they are paying are
being spent wisely.

According to the report, needed governance reforms include institutionalizing Open Data, particularly
passage of the Freedom of Information Bill; enhancing budget reporting to allow the public to track
spending; and simplifying tax procedures to improve compliance.
The report also recommends further reforms to enhance competition, including enacting and
implementing a clear competition policy; liberalizing key sectors of the economy that directly impact poor
Filipinos; further opening up the economy to more foreign competition; and strengthening regulatory
capacity.
These reforms can provide firms of all sizes and origins the incentives to invest and massively create
good jobs for all Filipinos, Chua said.

Chinas loss in manufacturing may well be Indias gain:

World Bank president Jim Yong Kim
http://articles.economictimes.indiatimes.com/2015-01-13/news/58024752_1_jimyong-kim-global-manufacturing-hub-boosting-manufacturing
NEW DELHI: Prime Minister Narendra Modi's 'Make in India' initiative to revive manufacturing in the
country may have drawn some scepticism at home, but World Bank PresidentJim Yong Kim sees it as a
good idea.
Kim said with many industries leaving China, India could well be a gainer when it came to manufacturing,
even as he suggested that the country's vibrant services sector must not get the short shrift as it attempts
to project itself as a global manufacturing hub. "I think that the efforts that are being made right now to
explore how competitive India can be and I think it is very important. There are lot of industries that are
leaving China right now and they very well may come to India... I don't see any downside to it," he told
ETin an exclusive interview. The World Bank, which will soon put out its growth forecast, has at present
pencilled in Indian growth picking up to 6.4% in 2015, up from around 5.5%, while China is forecast to
slow. Some analysts even see China'seconomy decelerating faster than previously thought, citing
difficulties in sustaining the country's investment-led model.

In contrast, the World Bank chief said India was one of the few "bright spots" in the world along with
theUnited States and noted the "tremendous sense of optimism" about the country. He said investors long
used to recount "horror stories of how difficult it was to do business in India" and said if the Narendra
Modi-led government simply followed through on its promises to cut bureaucratic red tape, provide regular
energy supplies and simplify rules for doing business, the country's growth prospects would get a major
boost.
"Right now we know it's a huge hindrance to investments. So, if he simply follows through on the things
he has committed to, I think prospects for growth would be transformed," he said. India now ranks 169th
on the global ranking scale for doing business, but Modi has set a target for getting within the top 50 in
the next couple of years. Boosting manufacturing is one of the cornerstones of the Modi government's
strategies for economic revival.
Importance of Keeping Promises
It has sought to capture this push through a high-visibility campaign called 'Make in India'. The
government is counting on manufacturing, whose relative importance as an engine for economic growth
had fallen as the services sector boomed in the past two decades, to propel the economy's expansion as
well as generate jobs for its restive millions.
Kim said while marketing India to investors as a great destination for manufacturing was a "good
message to send", it was also important to "continue to work on your strength" in services that accounts
for nearly two-thirds of the country's GDP. "I have shared this with Prime Minister Modi. Attractiveness of
service industry is so great in India that we at the World Bank are moving more of our operations to

Chennai and other parts of India," said the Korea-born American physician and anthropologist, whose
appointment as the bank's chief in 2012 took many by surprise.
"I do not think it is choosing manufacturing over services. It's a matter of stressing growth of
themanufacturing sector on the one hand, while also focusing on service sector. I think it makes sense to
have a multi-pronged strategy in India," added Kim, on his second visit to India during which he attended
the Vibrant Gujarat Summit that has come to be identified with Modi.
The World Bank chief also cautioned against straying from the promises made on fiscal prudence and
said it was something that underlined the country's credibility before investors. "Keeping your promise to
the global community is also going to be very important for confidence," he said. "There are lots and lots
of things that affect people's impression, mood about a particular country whether it's a good idea to
invest. One of them is keeping promises on budget deficits... We are very encouraged that Prime Minister
Modi and this government have kept 4.1% budget deficit number and we are also very encouraged that
they have recommitted to bringing down budget deficit down to 3% of GDP in the medium term."