‘Paralysis’ in PH economic development and poverty reduction

This refers to the editorial titled “Economic paralysis” (2/2/26).

It states: “The massive scale of the flood control corruption scandal appears to have distracted the administration’s economic managers from the urgent tasks at hand … The government appears to have been paralyzed by the tighter public scrutiny of government spending.

”Meanwhile, proof of the failure of agriculture and manufacturing as sustainable engines of growth and job generators, according to Ibon [Foundation], is the fact that the latest gross domestic product (GDP) data confirmed that manufacturing’s share of the economy has fallen to 17.3 percent … and agriculture to 7.9 percent. It warned that this will persist unless genuinely transformative structural reforms are undertaken, completing agrarian reform, massive public investments to improve rural productivity, and a determined plan for Filipino industrialization.”

It has been recognized that agriculture and industry act as foundational engines of growth by providing raw materials, food security, and manufacturing, particularly in developing economies. Modernizing agriculture boosts productivity, provides capital, and acts as a powerful engine for development. Over several decades, manufacturing drives structural change, creates jobs, and generates high-value exports, acting as an engine of growth. The service sector serves as the primary driver of modern, sustained economic growth, contributing over 50 percent of GDP and jobs.

Given the above explanation, it is worth comparing the percent shares of the agricultural, industrial, and service sectors to the GDP and corresponding population poverty incidence (PPI) of three neighboring countries in 2023. These are as follows: 1) Philippines – 9.4 percent, 28 2 percent, and 62.4 percent, respectively, and 15.5 percent PPI; 2) Indonesia – 12.5 percent, 40.2 percent, and 42.9, respectively, and 9.0 percent PPI (with 8.4 percent tax less subsidies), and Vietnam – 12.0 percent, 37.1 percent, and 42.5, respectively, and 4.2 percent PPI (with 4.4 tax less subsidies). In summary, both Indonesia and Vietnam, with service sector percent shares of GDP much lower than 50 percent, have much lower PPI than the Philippines.

Surprisingly, the country’s service sector has contributed much more than 50 percent of the GDP despite the fact that its agricultural and industrial sectors are not yet well developed and modernized. This means that the expanding service sector does not serve as the driver of modern, sustained economic growth with equity, but rather it caters more to the needs of the global economy, as shown by the flourishing overseas Filipino workers and business process outsourcing industries. This partial “paralysis” of economic development explains why the country’s poverty reduction has remained sluggish despite having attained economic development that was next to Japan in Asia in the 1960s.

Given the country’s growing population, low agricultural productivity results in perennial scarcity in the supply of rice and fish. It has been reported that fish prices in the country are a major source of upward inflation pressure, despite an overall moderate inflation rate. Hence, there is an urgent call for the government to reverse overfishing in the country’s vast marine fishing grounds, including the West Philippine Sea.