Crooks inflict dev’t curse

Economic managers have applied textbook solutions to achieve substantial growth, but due to the endemic and pervasive corruption these solutions have proven ineffective.

Instead, the malaise has weighed down the economy, preventing it from reaching its full potential.

Former Socioeconomic Planning Secretary Karl Kendrick Chua, who is also a former World Bank economist, said the government had ramped up infrastructure spending from a mere two percent of gross domestic product to the prescribed five percent.

“The problem now is we are not very sure if all of that went to infrastructure,” he qualified.

The government also spent a lot of money on social and personal services and the salaries of government workers.

As a former economic official, he is often asked, “Where are the results?”

He said the lockdowns during the Covid-19 pandemic wiped out P3.4 trillion in economic output.

Investing five percent of the budget in infrastructure is the formula that led nations to achieve an 8-percent annual growth, which Chua said is the ingredient for an economic leap.

He said that for at least one generation, East Asian miracle countries Indonesia, Thailand, Malaysia and Korea grew by eight percent. 

The demographic dividend, according to Chua, is a once-in-a-lifetime chance, and the Philippines might squander it due to the failure to create enough jobs for the working-age majority of the population.

The young median age of 24 is a comparative advantage for the country. “Indonesia and India are middle-aged. China, Vietnam and Thailand are aging. Japan and Korea have a dominant older population.”

Due to the young population, the trajectory for the economy is for strong growth since the country has more workers, but the danger is that mistakes, primarily abuses in government, will lead to missed opportunities as in the past.

All the risks, Chua indicated, point to some failure in governance.

“When I was in the National Economic and Development Authority, when something totally went wrong, I asked the person accountable to choose only from among four reasons: mismanagement, gross neglect, incompetence, or other factors such as a tsunami, traffic, earthquake, or typhoon and all of them pointed to some management or governance problem,” he said.

Thus, corruption may lead to a wasted demographic dividend and consequently, higher overall inequality.

According to the economist, having many poor people does not create problems.

“It is inequality. When people feel unfairly treated, they ask, ‘Why was I not given an opportunity?’ If someone took advantage of the system and became rich or stole money, then very deep-seated unhappiness, as the Arab Spring had seen, is created.”

He cited the quick-fix solution of social subsidy or ayuda  that has ballooned during the term of President Ferdinand Marcos Jr.

So if you put P389 billion in the budget as a subsidy, people want to know what the social outcome is.

On paper, the government is not far from its neighbors on social spending.

Per capita health spending in Vietnam is not significantly higher than in the Philippines, yet Vietnam has far better healthcare services.

“It is management,” Chua defined the difference.

The clincher is the neglect in the education sector which if not addressed, Chua said, will result in the demographic dividend “closing in our lifetime. The Philippines’ test scores for students are among the lowest in the region.”

It all boils down to the pervasive corruption in the country, which penalizes Filipinos by keeping them from getting the lift they need from the government to improve their lives.