Better jobs, a must

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Saturday, March 29, 2014

THE Philippines is enjoying a strong economic growth in the past decade. Credit ratings are up and many investors are becoming more confident to invest in the country. However, the country still faces challenges when it comes to job availability or proper jobs.

Just recently World Bank (WB) released the Philippine Development Report (PDR): Creating More and Better Jobs. The study was headed by Karl Kendrick Chua, WB-Philippines senior country economist.

According to the study, in order for the country to achieve inclusive growth, there is a need to create more and better jobs to reduce poverty. However, this presents a difficult task because of the country's long history of policy distortions that slowed the growth of the agriculture and manufacturing sector in the last seven decades. Chua said both sectors are huge job generators.

Also the deep-seated, structural issues in the economy also make the addressing of the job challenge more difficult.

"A unique window of opportunity exists today to accelerate reforms that will help create more and better jobs," Chua said, adding that it is important for the government, business, labor, and civil society to come together and agree on an agenda for job creation.

Chua said, based on the study, there is a need to develop the agricultural sector and revitalize the manufacturing sector. He said both sectors are able to create a lot of jobs and will cater to many Filipinos, particularly to the poor and those who haven't finished formal schooling.

According to the study, the development of the agriculture and rural sector is the "crucial" first step for the country to provide more and better jobs for the poor.

"Three quarters of the poor are found in rural areas and agriculture employs most of the poor. This means that agriculture can play a key role in efficiently reducing poverty," the study said, adding that productivity improvements in agriculture can help the country expand its manufacturing sector through lower minimum wages and input costs.

The study recommends the following for agriculture and rural development: securing long-term individual property rights to land can improve investments and productivity; increasing investment in agricultural public goods and support services instead of subsidizing farm inputs can enhance farm productivity and household income; pursuing for liberalization initiatives in the area of marketing and logistics; and employing a cluster and value-chain approach in delivering public goods and support services to connect smallholders and agribusinesses.

"Through strong local multiplier effects of family farms, the growth of this sector can then serve as an impetus for the growth of and job creation in the non-farm sector," the report said.

Another industry that will be able to generate much employment is the manufacturing sector. According to the study, the Philippines pioneered the manufacturing sector in Southeast Asia. However, since 1930 and with the exception of the food and electronic manufacturing industries, most of the industries in the sector have stagnated because of uncompetitive practices, small consumer base, and protectionist policies like overvalued peso, high tariff walls, and preferential loans, among others.

In order to reinvigorate the manufacturing, the PDR recommends increasing the competition in the economy and investing more for infrastructure.

"Having more constable markets can spur investment from both domestic and foreign sources, bring down cost of manufacturing inputs and logistics, provide workers in agriculture and informal services with better jobs in manufacturing, and increase real household income through lower consumer prices," the study said.

The PDR recommends the following for the manufacturing sector: the need to create an explicit competition policy to combat ongoing and potential anti-competitive practices that are not sanctioned under the existing legal framework; priority should be given to enhancing competition in key sectors -- ports, shipping, water utility, power, and air transport -- of the economy where there is huge potential for reducing poverty and creating jobs for the poor and vulnerable (directly or indirectly); promote more foreign participation, in addition to promoting domestic competition, that would facilitate technology transfer and innovation, create more jobs, and raise productivity of workers; and the independence and competence of important regulatory bodies and the justice system need to be ensured, and political and judicial interference in regulatory decisions, such as the reversal of decisions, need to be limited.

"The manufacturing industry requires little education so it can cater directly to the poor," Chua said.

However, Chua said for these sectors to be developed and the creation of better jobs for Filipinos, especially to the poor, there is a need for the government, business, labor, and civil society to work together and agree on an agenda on job creation.

"To put the country on an irreversible path of inclusive growth, broad reforms coalitions, both big and small, the national or local are needed," he said.

Chua said of the reasons why a coalition is needed is it increases the likelihood that reforms are sustained.

"The presence of a broad coalition makes it difficult for one group or invested interests to block the reform," he said.

Another reason is the coalition will be able to create a strategy that will appeal to the different segments in society.

The study recommends the following responsibilities for each sector: the government should enhance programs to reduce food prices without farm profits falling, provide universal social and health insurance, provide training and apprenticeships programs, and simplify business regulations. Businesses on the other hand should support reforms that promote competition to level the playing field, support freedom of association and collective bargaining, offer more training opportunities, improving the link between wages and productivity. Labor should recognize valid reforms of flexible contracts and reduce calls to hike minimum wages as food prices fall. Finally, the civil society should ensure broad-based participation and support for the coalition.

Chua said the coalition can begin with tripartite members (government - business- labor - informal workers with the support of civil society groups) and in the long run they can expand by including other sectors like the marginalized sectors.

"Successful implementation of agreements (such as the tripartite) to help the country restart its strucutral transformation by revising agriculture, supporting manufacturing, and creating better jobs in the services. This will allow the country to from the current pattern of high growth, high poverty, and weak employment to a pattern of higher, sustained and more inclusive growth with more and better job creation and poverty reduction," he said.

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