Poverty in the Philippines

Reprinted from the Asian Journal
November 16, 2007

(First of two installments)

You may have come across a news item heralding a bright economic forecast for the Philippines. President Gloria Macapagal-Arroyo, in a speech before the National Press Club, declared the country’s graduation from Third World to “Second World” or “Middle Class Country”.


The economist president based her optimistic comments on the fact that the annual per capita income has topped $1400 per year. Indeed, under Arroyo’s government, GNI per capita has steadily grown from $1,040 in 2000, $1,200 in 2004, and $1300 in 2006, as verified by the World Bank. Recently, GNI achieved the magic number of $1400/year. Assuming an annual decline of the poverty index by 1%, the President predicted the Philippines would join the prestigious rank of First World Countries by the year 2020.

I reacted to this news as if it was June 12, 1898 all over again, when Emilio Aguinaldo proclaimed independence from 400 years of Spanish colonial rule. Isn’t it about time we broke the shackles of colonialism and poverty, harnessed the talents of 85.2 million Filipinos, managed our natural resources wisely, got rid of political corruption, and closed the gap between the rich and the poor?

Happy images danced in my head, like throngs of exultant Filipino expatriates chartering flights back to the “best place on earth”, unending fiestas in prosperous and Wi-Fi connected rural communities, JCAHO accredited medical centers providing accessible health care to all, 5-star beach resorts affordable not only to Japanese, Korean, and German tourists but to Juan de la Cruz and his family. What a joy to imagine Dr. Jose Rizal’s “pearl of the orient seas” gloriously emerging from its craggy shell!

Shortly, thereafter, I read statistics that proclaimed the opposite. Eighty percent or 69 million Filipinos barely survive on P98 or $2 a day. Economic inequality -- or the gap between the haves and the have-nots --has actually widened the last 20 years. Income for the richest 10% is at least twenty times that of the poorest 10%. The net worth of the 40 most affluent Filipinos is $16 Billion or equivalent to the annual income of the poorest 9,600,000 families (approximately 49 million Filipinos).

Are we talking about the same country? The pristine archipelago made up of 7,107 tropical islands in the western Pacific Ocean, ranked the 12th most populous country in the world but 39th in the listing of world economies?

According to Forbes Asia (December 25, 2006), Henry Sy, who owns 27 shopping malls, Banco de Oro Universal Bank, Highlands Prime Holdings, plus shares in China Banking Corporation and Equitable PCI Bank, is the richest Filipino with $4.0 billion. Next comes Lucio Tan, owner of Philippine Airlines, Fortune Tobacco, Asia Brewery, etc., with $2.3 billion. Jaime Zobel de Ayala, patriarch of the oldest Philippine conglomerate, Ayala Corporation, which owns Ayala Land, Bank of the Philippine Islands, Globe Telecom, Manila Water Co., Integrated Microelectronics, etc., ranks third with $2.0 billion.

The assets of these three billionaires, together with those of several other top millionaires -- Eduardo Cojuango ($840 Million), George Ty ($830), John Gokongwei ($700), Tony Tan Caktiong ($575), Andrew Tan ($480), Emilio Yap ($350), Oscar Lopez ($315 million) and others -- surely qualify to make the country a First World kind of paradise. But do these super-rich Filipinos, living in the same country as 46 million Filipinos who barely earn a dollar a day and go to bed hungry each night, elevate the nation up to “Middle Class” status?

Nobody begrudges those who earn their money the hard way. John Gokongwei Jr., whose father died when he was only 13, sold thread, soap, and candles during World War II. He started a textile company at age 19 and ventured into food manufacturing at age 30. Gokongwei’s assets today include Cebu Pacific Air, Digital Telecommunications Philippines, First Private Power Corporation, JG Summit Petrochemical, Litton Mills, Robinsons Land, Robinsons Savings Bank, Sun Cellular, United Industrial Corp. and Universal Robina Corporation.

He could well be our Philippine version of Bill Gates or Google founders Larry Page and Sergey Brin -- bright, innovative, driven, hardworking entrepreneurs. But that is not the point.

From 2001 to 2006, due in part to “neoliberal globalization of the economy”, the net income of the top 1,000 corporations in the Philippines increased a whopping 327%, but left 11.3 % of the labor force unemployed and 18.7% underemployed.

Poverty is deeply entrenched because the development of a predominantly agriculture based economy is held back by rural land monopolies (Agro corporations). One-third of landowners still hold 80% of agricultural land. Seven out of ten farmers are landless. The much-heralded land reform has not come to fruition. The backward Philippine economy remains merely a source of cheap labor and raw materials while foreign and domestic boardrooms guide the government’s economic policies toward their parochial interests.

While the affluent barons spend their evenings in the best supper clubs and their weekends in luxurious beach resorts, 69 million of 85.2 million people struggle to survive. Thus, over 3,200 Filipinos leave the country each day, adding to the 10 million Filipinos toiling in 192 countries around the world, establishing the legend of the “Filipino Diaspora”.

Depending on one’s viewpoint, the phenomenon of the overseas Filipino worker is good or bad for the country. In 2006, expatriates remitted $12.8 billion, keeping the Philippine economy afloat. Remittances from Filipinos abroad make up the largest source of foreign revenue, surpassing the annual $2.5 billion direct foreign investment. While a boon to the economy, the phenomenon has contributed to dysfunctional family relationships and domestic strain.

President Arroyo-Macapagal is half right. In the second quarter of 2007, the Philippine economy did grow by 7.5%. Yes, the average per capita income of the Filipino is $1400 but that is only better than Vietnam, Laos, Cambodia, and Myanmar (Burma). We teach Vietnam farmers how to grow rice at the IRRI (International Rice Research Institute), yet we import rice from Vietnam.

We send our business professors from Manila’s Asian Institute of Management to teach Indonesians and Malaysians banking expertise. But our $117 billion economy ($145 according to other stats) is inferior to neighboring Indonesia, Thailand, Malaysia, and Singapore.

Our foreign debt burden has ballooned from $17 billion in 1980 to $60 billion in 2006.

First World Country by 2020? It could happen. But we would have to institute genuine land reform, spread the wealth, unleash the work force, get rid of politics as the national pastime. Likewise, regional development needs to be addressed because major economic benefits are narrowly funneled into Metro Manila at the expense of the impoverished central and southern regions of the country.

Certainly, we have diagnosed the illness. Do we have the national will to treat the disease?


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