Failing State and Governance Deficit

The author is a Senior Fellow of the Philippine Institute for Development Studies and Professorial Lecturer at the National College of Public Administration and Governance of the University of the Philippines. Dr. Llanto’s article was published in the July 13, 2009 edition of the BusinessWorld, pages S1/4 to S1/5.

A recent paper by Prof. Fernando Aldaba entitled “Poverty in the Philippines: causes, constraints and opportunities” presented at a recent workshop at the Asian Development Bank provided a detailed and insightful story of the extent and depth of poverty in the country and its causes.  It is a sad tale relative to the success of some countries in the region in releasing millions of people from the poverty trap.  In the past three decades Malaysia and Thailand have almost eradicated poverty while the Philippines seems to have fallen even deeper into poverty.  What is very disturbing is that at least half of poor households are “already mired in chronic poverty” with little hope of getting out of the mire.

Consider the following statistics provided by the author:
•    Historical poverty:  From 1985 to 2000, poverty was reduced at a snail’s-pace rate of 0.7% per annum.  There were 4.2 million more poor people in 2000 than there were in 1985.
•    Current poverty profile- 2000-2006: Poverty incidence among households increased from 24.4% in 2003 to 26.9% in 2006.
•    Subsistence poverty: The number of food-poor Filipinos reached 12.2 million in 2006, almost 15% of the entire population.
•    Self-rated poverty: In the first quarter of 2009, 47% or 8.7 million of Filipino families considered themselves poor. This was 53% in 2008; 53% in 2007 and 54% in 2006.
•    Millennium development goals:  Halfway through the 15-year-long process of achieving the MDGs, the verdict of the country’s top researchers is: “The goals, in all likelihood would not be met” (page 37).  Given the current global economic crisis, the prospects of achieving the poverty reduction goal have become even lower (page 37).

Prof. Aldaba lists the following factors behind the poverty situation: low to moderate growth for the past 40 years, unavailability of job opportunities, poor quality of jobs being created in the economy and the high and persistent levels of inequality.  Prof. Aldaba gives credit to government attempts to address the poverty situation.  Indeed, the government has provided substantial resources to various poverty programs but it seems that they are hardly making an impact, considering the statistics cited by the good professor.

Those anti-poverty programs are constrained by poor targeting, lack of accountability mechanisms and difficulties in coordination, inadequate monitoring and evaluation systems, a high turnover of officials and staff and chronic budget deficits.  But the question is why are these permitted to happen?  What is the principal reason behind the failure of those programs to deliver the envisaged results? Is it a question of resources? The government crows about its ability to borrow and has promised to launch a substantial stimulus package in response to the global economic crisis.  Is it a question of not finding the right policies? Consider that the country has not lacked for brilliant ideas.  Is it a question of inadequacy in capable human resources?  Note that Filipinos have flourished as technicians, managers, scientists, artists and entrepreneurs the world over.  Where then is the rub?

Reading the paper, one gets appalled at the sorry situation of poor households, whose problem with survival has been worsened by the global financial crisis.   Looking around the metropolis, one sees evidence of urban blight amidst the decadence of the rich.  The countryside offers no respite to the grieving soul: glum faces spell hunger, disease and malnutrition.

With images of a failing state easily conjuring up in the mind, one is tempted to ask: why has growth been so erratic and slow? When the country managed to grow, why has that growth continued to be slow? Why has the Philippines not been able to sustain growth and even bring it to a higher path like other countries which faced  similar, if not worse situations, but were able to sustain their growth and substantially reduce poverty? Why is there persistent inequality? Why is the economy not producing the right kind of jobs?

I submit that there are deeper underlying causes for the malaise affecting the country. It is a governance deficit that ails the country. Weakened and flawed political, economic and social institutions have become the most binding constraints to growth and poverty reduction, if not eradication.

Poor governance, inept leadership and an uninspired bureaucracy have much to do with the failure to grow and create jobs. Weak political and economic institutions are the real stumbling blocks to growth and poverty reduction.  In forum after forum many have raised complaints about regulatory capture, unstable policies, unchecked graft and corruption and disregard for the rule of law.  Real or imagined, these are reflective of a lack of credible, decisive and just leadership, of good governance.  Government complains about a narrow fiscal space, which limits development spending but policy makers continue to enact revenue-eroding laws.  Government announces program after program for farmers but they feel shortchanged and are tempted to abandon the land. Weak political and economic institutions constrain markets, which lead to low growth and failure to generate jobs, exacerbating the poverty situation.

As Harvard Professor Merilee Grindle once said: “Indeed it is all too clear that when governments perform poorly, resources are wasted, services go undelivered and citizens, especially the poor are denied social, legal and economic protection.  For many in the development community, good governance has become as imperative to poverty reduction as it has become to development more generally.”

My take on this is that there is deep poverty because of the poverty of our institutions.

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