For many years, I had used “narrow, shallow and hollow” to describe our economic growth performance. In particular, “narrow” referred to the limited sectors or industries driving our economy’s growth, thereby benefiting from it. These were dominantly in services, with the financial sector (banking and insurance), real estate, and business outsourcing services historically growing the fastest among the various industries of our economy.
Finance, in particular, grew briskly and consistently regardless of the pace of growth of the overall economy—suggesting that the banks thrived whether the economy is up or down. This is seen in how, in the last 15 years, when GDP growth averaged 5.8 percent annually, the financial sector grew annually at an average of 8.7 percent. Even when GDP growth hit its lowest in 2009 at 0.9 percent, the financial sector still grew at a hefty 8.3 percent! With bankers seemingly profiting through thick or thin, it’s no surprise that those who own our biggest banks are also among our top billionaires.
Real estate development is the other consistent rapid grower. Like finance, its average annual growth rate over the last 15 years (6.5 percent) significantly exceeds the average GDP growth rate, although not by as much as finance. In 2011, even as the economy slowed down dramatically to 3.9-percent growth after a high-growth (7.3 percent) election year, real estate surged by 9.3 percent, nonetheless.
But the industry does not necessarily benefit during economic slowdowns and grow consistently faster than the overall economy like finance does. In the first half of this year, when GDP grew at an annual rate of 6.3 percent, real estate grew by only 4.3 percent, and at the worst of the last global financial crisis, it actually contracted by 1 percent even as the overall economy still grew slightly.
Still, there is no doubt that real property development has been and continues to be highly profitable, and, like banking, is a business that is a major source of wealth for our top billionaires—another fast-growth industry where the greatest benefit accrues to relatively few.
It was this observation that led us in the 1990s to embark on an economic development strategy aimed at broad-based growth (before the term “inclusive” came in vogue). As chief economic planner then, I defined broad-based growth on three dimensions. First, we needed more broad-based economic growth sectorally, or propelled by much more than services, particularly finance and real property development. Agriculture and manufacturing, being mutually complementary and high job-generating sectors, particularly needed a big boost in their contribution to the economy.
Second, broadness also referred to the geographic dimension, as Metro Manila and its surrounding provinces (in Calabarzon and Central Luzon) accounted for the lion’s share of the nation’s economic activity, hence incomes. Mindanao people constantly criticized the lopsided allocation of resources and government attention to “Imperial Manila” and its environs, at their expense. It was in this light that the Ramos administration made a deliberate push to allocate much more budgetary resources to Mindanao, and tripled its share in the infrastructure budget in the 1990s.
The third dimension of broadness is the temporal one, spanning across generations. One of President Ramos’ first official acts was to create the Philippine Council for Sustainable Development (PCSD), so that representatives of civil society could sit at the same table with national policymakers to plan an environmentally, socially and economically sustainable future for the country. The PCSD did come up with a well-crafted Philippine Agenda 21, our own national strategy for sustainable development. But, as the common lament goes, we have excellent plans, but we falter in their implementation.
Are things less narrow now? Our progress is mixed. For seven years now, manufacturing has grown faster than the overall economy, and investments therein continue coming. Agriculture, however, continues to lag behind. There’s much more to tell, but we will have to tell the fuller story in another article.
Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.