|
IF the
Philippines grows at its highest gross domestic product
(GDP) growth during the past 10 years, it will take 159
years before it catches up with the growth achieved by
member-countries of the Organization for Economic
Cooperation and Development (OECD).
This is
part of the findings of the final report of the
Commission on Growth and Development, titled, “Growth
Report: Strategies for Sustained Growth and Inclusive
Development.” The commission is cofunded by the World
Bank, the William and Flora Hewlett Foundation and the
governments of Australia, Sweden, the Netherlands and
United Kingdom.
“Growth
is not an end in itself. But it makes it possible to
achieve other important objectives of individuals and
societies. It can spare people, en masse from poverty
and drudgery. Nothing else ever has. It also creates the
resources to support health care, education and the
other Millennium Development Goals to which the world
has committed itself. In short, we take the view that
growth is a necessary, if not sufficient, condition for
broader development, enlarging the scope for individuals
to be productive and creative,” the report noted.
The
report also sought to describe the differences in the
economic performance of developing countries by
estimating the growth rate it would need to achieve to
catch up with industrialized countries at a given date,
in this case, 2050 and 2100.
In the
report, the commission said that using data from 1996 to
2006, the country only grew by a maximum of 4.3 percent
and an average of 2.2 percent. To catch up with OECD
countries using this data, the commission said the
Philippines needs 159 years to become fully
industrialized.
However,
if the country wants to catch up by 2050, it will need
sustained growth of 6.5 percent; and to catch up by
2100, the country needs a GDP of 4.1 percent.
“Because
industrialized countries’ secular growth rate is about 2
percent per capita, developing countries need to grow at
much higher rates to catch up,” the report stated.
“Many
countries have an average per capita growth rate for the
decade well below the OECD secular per capita growth
rate, implying that they would never catch up at such
rates. On the other hand, [data show that] all countries
grew at a rate above 2 percent in at least one year.
Using this rate renders the calculation mathematically
feasible, but its economic meaning needs to be
interpreted carefully,” the report warned.
Meanwhile, since 1960, the report said only six of the
25 largest developing countries in the world have grown
faster than 3 percent in terms of per capita while 10
had growth rates below 2 percent.
This,
the report stressed, implied that many developing
countries like the Philippines have fallen farther
behind industrialized countries’ incomes.
The
Philippines’ real GDP in 2006 was $99 billion, which
contributed 1.2 percent to the total real GDP of
developing countries in 2006.
The
country’s real compound annual GDP growth rate from 1980
to 2006 was 2.9 percent, while per capita GDP grew by
0.7 percent. On the other hand, the report said, the
Philippines’
real GDP from 1960 to 2006 grew by 4 percent while per
capita GDP grew by 1.4 percent.
“Growth
strategies that rely exclusively on domestic demand
eventually reach their limits. The home market is
usually too small to sustain growth for long, and it
does not give an economy the same freedom to specialize
in whatever it is best at producing,” the report stated.
“Catch-up growth is also made possible by an abundant
labor supply. As the economy expands and branches out,
new ventures draw underemployed workers out of
traditional agriculture into more productive work in the
cities. Resources, especially labor, must be mobile. No
country has industrialized without also urbanizing,
however chaotically,” it added.
The
report also emphasized the need for a strong leadership
and effective government to attain economic growth. The
report said “an increasingly capable, credible and
committed government” is important, particularly in
achieving catch-up growth.
The
commission said policymakers need to choose a growth
strategy, communicate their goals to the public and
convince people that the future rewards are worth the
effort, thrift and economic upheaval.
“[Policymakers] will succeed only if their promises are
credible and inclusive, reassuring people that they or
their children will enjoy their full share of the fruits
of growth,” the report stated.
The
report also highlighted the need for impressive rates in
public investment for infrastructure, education and
health, especially when attaining rapid economic growth.
Investments for these sectors pave the way for new
industries to emerge and raise the return to any private
venture that benefits from healthy, educated workers,
passable roads and reliable electricity.
“Growth
entails a structural transformation of the economy, from
agriculture to manufacturing, from a rural work force to
an urban one. This transformation is the result of
competitive pressure. Governments committed to growth
must therefore liberalize product markets, allowing new,
more productive firms to enter and obsolete firms to
exit. They must also create room to maneuver in the
labor market, so that new industries can quickly create
jobs and workers can move freely to fill them,” the
commission stressed.
Launched
in April 2006, the Commission on Growth and Development
brings together 21 leading practitioners from the
government, business and the policymaking arenas, mostly
from the developing world. The commission is chaired by
Nobel Laureate Michael Spence, former dean of the
Stanford Graduate Business School; Danny Leipziger, vice
president of the World Bank, is the commission’s
vice-chairman.
Over a
period of two years the commission was tasked to seek to
gather the best understanding there is about the
policies and strategies that underlie rapid and
sustained economic growth and poverty reduction. The
commission’s audience is the leaders of developing
countries. |
