"It's possible but not probable."
"It's possible but not probable."
Given the socioeconomic circumstances of a typical developing country, a candidate for public office in such a country approaches the issue of poverty incidence with the highest degree of sensitivity and offers a poverty-rate reduction program to the electorate only if absolutely pressed to do so. Presumably assured by his economic advisers that it was achievable, 2016 presidential candidate Rodrigo Duterte promised a reduction in the national poverty rate by 2022 to 14 percent of the population. The rate in 2016, according to official data, was 26 percent.
Has Mr. Duterte, now president of the Philippines, made progress toward delivering on his campaign promise? He apparently has. The most recent Social Weather Stations survey placed the national poverty rate at a little over 21 percent. A validated 5-percent increase is definitely commendable; a mere 1-percent decrease takes tens of thousands of Filipinos out of the clutches of poverty.
It took the first half of President Duterte’s six-year term to achieve the 5-percent decline in the national poverty rate. Now he only has three years to bring about or further decrease of 7 percent—and the clock is ticking.
Is Mr. Duterte likely to deliver on his electoral campaign promise to bring the national poverty rate to 14 percent by 2022? Like all sensible Filipinos, I would dearly love to see such a socioeconomic desideratum come to pass. But I am pessimistic, considering that the decrease from 26 percent to 21 percent was achieved only with great difficulty and enormous effort.
In any evaluation of the achievability prospects of any poverty reduction program in the Philippines, three factors loom very large: Agriculture, population growth, and the heavy reliance of government fiscal policy on excise taxes.
First, agriculture. Thanks largely to flawed agricultural policies and government ineptitude coupled with financial leakages, Philippine agriculture has established a track record consisting of low farmer and fisherfolk incomes, high-cost products and uncompetitive operations. The passage of the Agriculture and Fisheries Modernization Act was meant to give the agriculture and fisheries sector a shot in the arm, but the sector remains underperforming and uncompetitive. It will be difficult to bring about further substantial poverty reduction as long as the farmers and fishermen remain a low-income group.
Then there is the bias toward excise taxation of the Duterte administration’s TRAIN program. Excise taxes are income taxes in disguise, and the low-income groups are hit hard when the fiscal authorities would rather rely for revenues on the kinds of taxes from which there is no escape, i.e., excise taxes. That the inflationary surge of 2018 was in large part attributable to the impact of higher fuel taxes on transportation, power generation and manufacturing has been conceded.
Finally, there is the elephant in the room—population growth. The persistently high rate of Philippine population growth is seldom discussed these days—thanks to the Catholic Church and to economists who would rather think in terms of a “demographic sweet spot”—but the economic policy implications of the elephant in the room need to be addressed. This country’s population is very probably at least 100 million, and it continues to grow annually at the rate of around 1.9 percent. Population-wise, the socioeconomic policymakers are virtually on a treadmill; they’re running fast in order to stay in the same place.
At this point I return to the question of whether a reduction of the national rate to 14 percent by 2022 is possible. Is it possible? It is, but because of the factors discussed above, it is improbable.