Spotlighting on High Economic Growth, Employment of the Poor, and Poverty Reduction: A Three-Pronged Strategy

The strong popular mandate of the new president brings high hopes for bold economic reforms. A three-pronged strategy to deal with the Philippine under-performance in economic growth, generate more employment especially among the poor and to reduce poverty is suggested. The strategy consists of : (1) raising the volume of targeted subsidies to assist very poor families; (2) amending the restrictive economic provisions from the constitution so that they are moved to the body of the country's ordinary laws; and (3) establishing special labor employment zones as industrial estates in low income sub-regions where the enterprise locators can hire labor at market-determined rates. The three-pronged strategy is linked tightly. The government must commit to make a substantial increase of funding of (1), as soon as it has established, but not before, that reforms (2) and (3) will have been achieved. Only a president with a strong mandate and who enjoys great popularity can push through the political storm that reforms (2) and (3) are likely to invite. The constitutional amendment will transform the psychology of the economic reform processes within the country. It will remove the jurisdiction of the courts on economic policy legislation and on business issues on grounds of constitutionality. For another, it will focus the democratic process to the passage of the proper legislation suited to the country's needs in relation to foreign investment. The two reforms will stimulate the entry of foreign direct investments, facilitate interest again of highly labor using industries that have left the country for foreign locations to come back, enable domestic firms to adjust their labor costs more effectively, and stimulate the employment of the large numbers of unemployed and underemployed into organized and modern sectors of the economy. They will raise the country's growth rate closer to those of high growth East Asian economies and contribute to the eradication of high unemployment in the economy while reducing poverty.