ELEC 4

CURRENT ECONOMIC ISSUES

In Partial Fulfillment of the Requirements for

Bachelor of Science in Business Administration

Major in Business Economics

Submitted by:

MARY JOY AGANG

BSBA-4C

Submitted to:

MR. JOSEPH CHARLIE MISLANG

Adviser
 TABLE OF CONTENTS

Introduction ................................................................................................................ 3

Economics Problems of the Philippines .................................................................. 3

Unemployment ........................................................................................................... 4

Poverty ....................................................................................................................... 5

Poor Infrastructure...................................................................................................... 6

Heavy Dependence on Remittances .......................................................................... 7

Lack of Educational System ....................................................................................... 9

Corruption ................................................................................................................ 11
 Introduction

Economics Problems of the Philippines

Like most other southeast Asian regions, Philippines too has a history of European
colonization. It was a colony of Spain and the USA. The country is now home to
multiple cultures and ethnic groups. It is also looked upon as a perfect example of a
'mixed economy'. Traditionally, the economy stabilized on the agrarian contributions
and the manufacture of garments, pharmaceutical products, and semiconductors. In
the last decade, electronic exports added to the exports, along with various products
obtained by mining. Though Philippines too suffered in terms of exports, remittances
from overseas Filipino workers, and foreign direct investments, during the 2008 global
economic crisis, there has been steady economic growth in the recent years. However,
there are certain economic problems that cannot be ignored. The following sections
list out some of the economic problems of the Philippines.
 Unemployment

According to Philippines Statistic Authority, 10 million Filipinos were either

unemployed (three million) or underemployed (seven million). In October 2013,
unemployment rate was 6.5% in comparison to 6.8% in 2012. According to the Labor
Force Survey, the unemployment rate was 6% and 6.6% in October 2014 and January
2015, respectively.

Only one-fourth of the Filipinos that enter the labor force are able to find good jobs in
the country, and the rest of them find jobs overseas, leave the labor force, or end up
becoming unemployed/underemployed. Thus, three-fourth of the workers are
unemployed or informally employed, with lack of opportunities to find good jobs.
Though jobs are being generated, there's a need to generate jobs at a much faster
rate, to be able to bring down the unemployment rate. Many of the unemployed
individuals are college graduates. Many waits for job opportunities abroad, and many
families depend on remittances from family members who are staying abroad.
 Poverty

Despite the talk about economic growth, the poverty rates have not changed
significantly since 2006. As per the National Statistical Coordination Board (NSCB),
poverty incidence of the population improved from 26.3 percent in 2009 to 25.2 percent
in 2012.

Even though Philippines is a fast-growing economy, there's been just a minor decline
in the incidence of poverty. Poverty is very much linked to unemployment.
Unfortunately, the growth is restricted to the BPO, retail, and real estate sector, and a
large number of Filipinos remain without jobs. On top of that, natural calamities further
push people below the poverty line. Thus, economic disparity is a common feature. In
general, the gains from higher economic growth have not really trickled down to the
poor.
 Poor Infrastructure

Infrastructure is one of the biggest challenges. In the Global Competitiveness Report

2014-2015 of the World Economic Forum, Philippines didn't fare well in terms of the
quality of the overall infrastructure. It ranked at number 91 among 144 countries. This
can be attributed to underinvestment in infrastructure. In order to host global
companies, Philippines will have to pay more attention to enhancing the infrastructure.
A well-developed transportation (roads, railroads, ports, and air transport) and
communication system is extremely essential for economic activities. As per the World
Bank's Ease of Doing Business 2015 report, Philippines ranked 95 out of 189
economies. It needs to improve its ranking in certain categories. It ranked 161 in the
category of starting a business, 124 in dealing with construction permits, 108 in
registering property, 104 in getting credit, 154 in protecting minority investors, 127 in
paying taxes, and 124 in enforcing contracts. Thus, the policy makers should take
steps to attract global companies or investors.
 Heavy Dependence on Remittances

Philippines was the third-highest recipient of migrant remittances in 2013, after India
and China. According to the Philippine Central Bank, remittances from overseas
Filipino workers (OFWs) reached USD 25.1 billion in 2013. It was 7.6% higher than
the remittances from the last year, and accounted for 8.4 % of Philippine gross
domestic product (GDP) in 2013.

The source countries for the remittances included the United States, Saudi Arabia, the
United Kingdom, the United Arab Emirates, Singapore, Canada, and Japan. The
country heavily relies on these funds. Their economic growth can primarily be
associated to the remittances from the overseas Filipino workers, as well as the growth
in the Business Process Outsourcing (BPO) sector. Also, one cannot rule out that the
growth is connected to the global economy. In the event of any crisis, economic growth
is bound to suffer. Thus, greater attention has to be paid to addressing to the internal
problems of the economy and enhancing domestic-oriented growth. A policy of
removing structural impediments to growth has to be adopted, with lesser focus on
foreign investors and exporters.

Besides the aforementioned issues, corruption is another aspect that needs to be

taken care of. The current administration needs to prepare an industrialization program
that encourages value-addition manufacturing or services and builds Filipino-owned
industries. Being overly dependent on global economy or remittances from Filipinos
living abroad will make the nation vulnerable to external shocks. Thus, the aim should
be to encourage inclusive growth in the country by creating employment opportunities
and reducing poverty.
 Lack of Educational System

This is the first major issue that the Philippine government should resolve but
somehow it is recently improving. The quality of Philippine education has declined few
years ago due to poor results from standard entrance tests conducted among
elementary and secondary students, as well as the tertiary levels. The results were
way below the target mean score. High dropout rates, high number of repeaters, low
passing grades, lack of particular language skills, failure to adequately respond and
address the needs of people with special needs, overcrowded classrooms, and poor
teacher performances, have greatly affected the quality of education in the Philippines.

Philippine education is strongly viewed as a pillar of national development and a

primary avenue for social and economic mobility. It has undergone several stages of
development from the pre-Spanish time to the present. It is handled by three
government organizations, namely, the Department of Education, Culture, and Sports
(DECS), the Commission on Higher Education (CHED), and the Technical Education
and Skills Development Authority (TESDA). The DECS govern both public and private
education in all levels, with its mission "to provide quality basic education that is
equitably accessible to all by the foundation for lifelong learning and service for the
common good."
There is a large proportion of mismatch between training and actual jobs. This issue
arises at the tertiary level and causes a large group of unemployed and
underemployed. This is very true nowadays because of the arising BPO industries
particularly the call center companies. Hundreds of thousands of young professionals,
graduates or undergraduates from college level settled at this type of company
because of the attractive compensation that they are offering. Call center companies
do not require a specific degree of education, what matters to them is the proficiency
in the English language.

There are some measures that the Philippine government has looked into for the
reformation of quality education. Technology use is starting to gain momentum in the
overall education of this country. This helped improve the quality of education in the
Philippines and to be globally competitive in this millennium. But hopefully, with much
further improvement from the country's economy and involvement, education in the
Philippines could be drastically changed for the better.
 Corruption

High corruption levels severely restrict the efficiency of businesses operating in the
Philippines. Extensive bribery within the public administration and vague and complex
laws make foreign companies vulnerable to extortion and manipulation by public
officials. Favoritism and undue influence are widespread in the courts, leading to time-
consuming and unfair dispute resolution, and to an uncertain business
environment. Corruption plagues the customs administration, and fraud routinely
occurs for companies when filing import and export documentation. The Anti-Graft and
Corrupt Practices Act criminalizes active and passive bribery, extortion, abuse of
office and conflicts of interest. Giving gifts, except for gifts of insignificant value given
in line with local customs, is prohibited. Facilitation payments are not addressed by
anti-corruption regulations and private sector bribery is not criminalized. The legislative
framework for fighting corruption is scattered and is not effectively enforced by the
weak and non-cooperative law enforcement agencies.