Is it possible for the Philippines to get out of its chronic poverty?

Is there hope to climb out of our economic doldrums?

by Monette Iturralde-Hamlin / February 21, 2022

Growing up, I was taught that we were fortunate to live in the Philippines. An archipelago, the Philippines was rich in natural resources, had a strong agricultural economy, and was one of Asia’s industrial powerhouses, exporting agricultural, mineral products, garments, and electronic components. We were second only to Japan in East Asia. I was proud to be Filipino.

This happy state of affairs began to fray in the early 70s with the start of Martial Law, and rapidly declined in the 80s, as the country could no longer meet the mounting international debt resulting from unbridled spending by then President Marcos. Crony capitalism, monopolization and corruption dug its claws into the economy, and we sunk deeper and deeper into debt with the International Monetary Fund (IMF). 

When I took up my Masters in Business Management (MBM) at the Asian Institute of Management at the start of the 1980s, my classmates from the other Asian countries remarked on how progressive they saw our country. As our economy continued to nosedive, many of my friends decided to up and leave the country for better opportunities overseas. I decided to stay, fiercely nationalistic or perhaps naïve, believing in the Philippines and its recovery. Meanwhile, our Asian neighbors got their act together and forged ahead economically.

Sadly, here we are today still struggling to better our economy. 

Last year, I had an interesting fireside chat with Standard Insurance Co. Inc.’s President and CEO John Echauz. This happened during the International Innovation Summit which my company, TeamAsia organized for the Information Technology and Business Process Association of the Philippines (IBPAP). I asked John what we can do to get out of poverty.

Entitled “Eyes and Ears on the Ground: Navigating and Pushing for Sustainability,” John shared how as an eight-year-old boy riding home from school, he observed a young girl selling a garland of sampaguita on the road, and how he wished that by the time he turned 40 that the country would no longer be poor. Alas, the Philippines is still beset by poverty and gross inequality, and he feels strongly that we can all do something about it. 

For starters, he recommends that the Philippines increase its level of economic complexity based on the theory of Prof. Ricardo Hausmann of Harvard Kennedy School of Government and Prof. Cesar Hidalgo of MIT. Simply put, the more varied products and services that the country can produce, the better off it will be. 

Not being an economist, I decided to read up on Hausmann and Hidalgo’s Theory of Economic Complexity to better understand it. They argue that the breadth and depth of a country’s productive capabilities will determine its economic development. The more varied and deep a country’s productive resources, entrepreneurial capabilities and production linkages are, the better equipped it is to produce goods and services that will help it grow and develop. 

What consists of productive capabilities? A lot of things, such as a country’s human capital, its natural resources, infrastructure, laws, machines, books, collective knowledge, information and communication technology (ICT), and more. Since it is difficult to measure such diverse and complex data, Hausmann and Hidalgo instead propose analyzing the mix of products that countries export. This algorithm they call the Economic Complexity Index (ECI).

Esteban Ortiz-Ospina and Diana Beltekian made it even simpler for a non-economist like me. In their article in Our World in Data, they used the following metaphor: “If economies are like restaurants, then productive capabilities are all the stuff that is needed in the kitchen; so the ECI ranks restaurants by comparing the menus, rather than by comparing the recipes, food and people behind the kitchen doors.” In other words, restaurants with a diverse and sophisticated menu perform better than restaurants with similar menus. Now, I get it!

John likened the Philippines’ situation to a dengue patient with very low platelets, as we only have limited products like electronics compared to other countries. For the country to succeed, the goal is to have a critical mass of companies and businesses that make products that are relatively complex and not ubiquitous (common). To get out of poverty, John says we need at least 200,000 companies employing at least 100 people and producing at least one competitive good or service. As a country, we are poor because we only have 15,000 companies, not even 10% of the critical mass.

The good news is that it is doable, John says. Many members of IBPAP are already doing what they can to bring in foreign exchange, with global standards, best management skills, and savvy tech know-how. We just need to get our act together to build a deep, diverse and resilient economy with a mix of export and domestic consumption.

So, can we as a country climb our way out of poverty? Only if we get our act together. 

Let’s start by taking the time to discern what kind of leader we want for our nation, and what leadership qualities we want in our president. As for me, I want someone who is honest, authentic, with unquestioned integrity and strong moral values. Someone who has a strong vision for the country’s future and a deep desire to eradicate poverty and inequality. One with a solid economics and legal background, a sterling track record of leadership and good governance, and most important, someone who can inspire Filipinos by walking the talk.

And after discernment, action is needed. I know who I’m voting for. I hope you do too. Let’s vote wisely on May 9.

Read also

• What is Inclusive Leadership, and are we doing enough to make it happen?
• The Art of Pivoting (or What Dinner Taught Me Tonight)
• Join, Work, Grow. Together.