Jobs Key to Making Economic Growth More Inclusive in the Philippines

October 27, 2016

Victoria Kwakwa, Vice President for East Asia and Pacific Region BusinessWorld

My visit to the Philippines this month has been a window into the country’s vibrant culture and dynamic economy -- currently the fastest-growing among major East Asian countries. In the first half of 2016, the Philippines grew at an annual rate of 6.9%, outpacing economic growth in China, Vietnam, and Indonesia, among others. Business and consumer surveys also point to positive sentiments on the overall direction of the economy.

Although economic performance is up, my conversations across the public and private sectors in Manila and Davao City also revealed deep concern and growing urgency around one key challenge: the need to make growth more inclusive for all Filipinos.

Job creation is at the heart of the challenge of making growth more inclusive.

In the Philippines, the jobs challenge has a few key dimensions. First, despite some recent gains in employment, underemployment remains a persistent problem that now affects nearly one in every five working Filipinos. Second, informality is widespread. Roughly two in every three Filipino workers find his or her employment in the informal sector. We all know that informality often means lower-wage and lower-skill jobs without the benefit of written contracts, social insurance, or access to severance pay.

Delivering more and better quality jobs is critical for making growth more inclusive and for picking up the pace of poverty reduction in the Philippines. Mindanao is a case in point. World Bank analysis shows that good jobs -- those that raise real incomes and lift people out of poverty -- are needed for 2.4 million Mindanaoans who are either unemployed (460,000) or underemployed (1.9 million). This means delivering a total of 6.3 million jobs in the next six years alone. Conversations with stakeholders in Mindanao underlined the key role of private investment and effective public sector support for making robust job creation a reality, helping to break the cycle of violence and poverty.

The jobs challenge in Mindanao is daunting but can be tackled through strong partnerships and strategic action. This will include harnessing opportunities in rural areas, in the many emerging urban centers and in conflict-affected areas. For example, promoting higher agricultural productivity and agri-business development for high-potential products can make a real difference in rural areas. To achieve this, access to credit for farmers and agricultural extension services will need to be expanded. Mindanao’s urban centers can leverage their potential to become hubs for agribusiness and business process outsourcing through addressing power and logistics gaps. In all areas of Mindanao, skills development programs, especially for youth, will prepare the workforce for employment in jobs that will pull families out of poverty.

In conflict-affected areas of Mindanao, the key initial step will be stabilizing those parts affected by insecurity. Global experience from similar contexts shows the potential for cash-for-work and entrepreneurship schemes for meeting the immediate income generation needs of out-of-school youth and ex-combatants, helping to create a foundation for sustained progress. Simplifying business regulations will help small and medium enterprises to grow and employ more people.

The new administration is taking on the jobs challenge, including through the 10-point socioeconomic agenda that aims to enhance key aspects of the economy and human development. The ambitious and important agenda also has potential to improve the quality of public services and enhance government accountability to the Filipino people. The new administration has also reassured businesses and investors on continuity of macroeconomic policies that are working. The recent signing of the Freedom of Information (FoI) Executive Order is another important step forward for promoting transparency in the public service. These early signals bode well for strengthening the foundations for more inclusive growth in the Philippines.

Strong partnerships will be vital for accelerating progress on inclusive growth, and I was particularly grateful to engage with an impressive cross-section of civil society. Broad coalitions for change will help to drive more inclusive growth, and the dedication and creativity of the Filipino people that has served the Philippines well will continue to be essential. Together with other development partners, the World Bank remains strongly committed to partnering with the Philippines to accelerate delivery on the agenda of inclusive growth, peace and development towards realizing the aspirations of all Filipinos.

Victoria Kwakwa is the World Bank’s vice-president for East Asia and the Pacific.

First published on October 20, 2016 via BusinessWorld