Why Is the Philippines Still Poor?

By Dr. Bernardo M. Villegas

Filipino overseas workers, more than any one else, have the right to ask the question

why the Philippines remains to be a poor country while many of our East Asian neighbors,

who used to be less developed economically than we (such as South Korea, Taiwan,

Singapore, Malaysia, etc.) have eradicated or significantly reduced mass poverty. Why are

close to 30 percent of our population still suffering from dehumanizing poverty? It is

grinding poverty that drives millions of Filipinos to incur very high social and spiritual costs,

leaving their loved ones at home, in order to eke out a decent living for their respective

families.

I do not pretend to know all the answers. I have been asking myself the same question

over the last forty years and have come out with a few basic answers. I hope I can contribute

some light especially to our OFWs who are sacrificing some of the best years of their lives to

help us combat this most important economic challenge through the remittances that they

send year in and year out. As I have said in several occasions, this year 2009 we may get as

much as much as $18 billion from our OFWs, contributing to the 4 percent GDP growth that

I am personally forecasting for 2009, surpassing the more pessimistic prognostications of

international and national agencies.

It is easy to blame corrupt government officials and greedy capitalists for our enduring

poverty. Without condoning corruption and dishonest practices, I must point out that, with

the exception of Singapore, East Asian countries that have eliminated poverty were also

notorious for corruption. Just think of Japan, South Korea, Malaysia and Thailand. Their

government officials and private entrepreneurs were not exactly paragons of honesty and fair

play during the decades when their respective economies were growing by leaps and bounds.

Every society has to uproot corruption for moral reasons. Dishonesty is immoral. It should
 2

never be tolerated in any democratic society. But it does not explain the main difference

between countries that succeed in eliminating poverty and those that fail. We must find the

difference somewhere else.

The neo-Malthusians blame rapid population growth for our poverty situation. I find

this explanation laughable especially during these times when the only countries in Asia that

are posting positive GDP growth rates are the countries which huge populations, and

therefore sizable domestic markets which partly immunize them from collapsing export

markets. If one takes a look at the so-called emerging markets that are forecasted to dominate

the global economy in the next twenty years, they have a common denominator: they all

have at least 50 million people, i.e., Brazil, Russia, India, China, Indonesia, Pakistan, Mexico,

Indonesia, Vietnam, the Philippines, etc. Large and young populations have two advantages:

they provide low-labor costs and attractive consumer markets. The ones who are afraid that

the Philippines will have Standing Room Only (SR0) if our population keeps growing should

be told that our rich East Asian neighbors have population densities much higher than the

Philippines: Singapore (7,223 per sq. km), Hong Kong (6,501), Taiwan (625) and South

Korea (483). When Philippine population peaks in 2025, the population density will not even

exceed 400 persons per sq. km. In addition, the Philippines is much richer in natural

resources than these four tigers.

Then why is the Philippines poor? The main answer is that for thirty long years after

the Second World War, our leaders adopted economic policies that fostered an inward-

looking, import-substitution industrialization based on protectionist, anti-market and ultra-

nationalist ideologies not very different from what most Latin American countries

implemented with the same dire consequences. Over-reacting to our colonial past (as did the

Latin Americans), we equated economic development with capital-intensive industrialization

that did nothing to address our massive unemployment and underemployment problem. The
 3

worst consequence of these failed economic policies was not the eventual demise of the so-

called infant industries that never grew up. The most devastating result was the almost

criminal neglect of countryside and agricultural development. Because we used up our

capital resources in the white elephants of the manufacturing sector, there were no resources

left to build farm-to-market roads, irrigation systems, post-harvest facilities, seaports, and

airports that were essential to making our small farmers productive. Agrarian reform failed,

not because of the fragmentation of land, but because we did not provide the small farmers

with the wherewithals to be both productive and cost-effective.

For some of our economic policy makers during this sad stage of our history, the

neglect of countryside and agricultural development was more of a sin of omission: they

were so obsessed with industrialization that they were blind to the needs of the rural

populations, which accounted for 50 percent or more of the labor force. For a few others,

however, the neglect of the countryside was based on an ideology that agriculture was a

despicable sector that was the very symbol of colonial servitude. I remember debates that the

late Jimmy Ongpin (who served as Finance Secretary under President Cory Aquino) and I had

with some leading economists who were hell bent on investing more heavily on capital-

intensive industries oriented to the domestic market. Because we were arguing for more

investments in agriculture, we were accused of wanting to keep the Philippines as a "hewer of

wood and a drawer of water." Jimmy Ongpin even made a trip to Southern Spain to present

evidence to these critics of agriculture that agribusiness can be even more high-tech than the

old-fashioned manufacturing projects that the fanatics of industry wanted to push.

The rest is history. The bias against agriculture was so ingrained at the highest levels of

Philippine society that it took almost till the end of the last century before a real shift toward

agricultural and rural development could take place. In the meantime, our non-identical twin

in the late 1970s and early 1980s, Thailand, was busy building farm-to-market roads,
 4

irrigation systems, post-harvest facilities, etc. The result was dramatic. Whereas we were

well ahead of Thailand in almost all indicators of human development in the late 1970s, today

Thailand--the agribusiness superpower of Southeast Asia--has twice our per capita income

and a poverty line one-third ours. It has become the largest rice exporter in the world and a

large exporter of many other high-value agricultural products. Because of the enlightened

policy of focusing on rural and agricultural development, Thailand has been able to attain a

higher level of development and significantly reduce poverty, despite the fact that corruption

has also been rampant in that country.

Our story does not have to have an unhappy ending. In 1998, when Senator Edgardo

Angara was the Secretary of Agriculture under the Estrada Administration, we saw a

definitive shift away from inward-looking, import-substitution industrialization towards rural

and agricultural development. Fortunately, this redirection of economic policy has been

retained under the Administration of President Gloria Macapagal Arroyo. Witness the

significant improvements in countryside infrastructure represented by the Philippine nautical

highway which has greatly improved the efficiency of transport of agricultural products from

one island to another. The very visible improvements in Central Luzon (Clark-Subic-Tarlac

highways) are being replicated in the Northern Luzon Agribusiness Quadrangle, in many

regions in Mindanao, in very poor provinces like Aurora and Bicol, etc. As long as the next

President will continue the focus on countryside infrastructure, we can be optimistic that we

can make a dent on our serious poverty problem in the next ten to twenty years. After all, 70

percent of the Philippine poor are in the rural areas.

There is one advice I would like to give to the OFWs reading this column. If and when

you return to the Philippines, use your talents, experiences and capital to engage in small and

medium-scale businesses in your respective provinces. You can grow high-value crops like

tomatoes, lettuce, cabbage, papaya, sweet pineapple, honey dew melon—especially in

 5

provinces like Laguna, Cavite, Batangas, and Bulacan which have the ten million consumers

of Metro Manila as your market. You can also operate restaurants, bed-and-breakfast and

other tourist facilities, nurseries and kindergartens and other service establishments in the

increasingly urbanized rural areas in Central and Northern Luzon and in Northern and

Southern Mindanao. Staying in the provinces does not mean that you have to be necessarily

involved in agriculture. You can be in the many small-scale industries and services that are

now dotting the countryside as better infrastructures are helping to disperse population away

from the National Capital Region. As you come close to retirement age, you will find living

in the Philippines much more pleasant than staying wherever you are. As you helped them

with the remittances you sent all these years, you can also help to take care of your aging

parents and grandparents with your physical presence upon your return. For comments, my

email address is bvillegas@uap.edu.ph.