Millennial Asia

This article reviews the state of anti-corruption efforts in the Philippines by outlining a typology of corruption and evaluating the country’s progress on these different fronts. Notwithstanding recent gains, the country appears stuck in its anti-corruption efforts. While reforms have managed to advance economic growth, corruption nevertheless continues to undermine private sector investments in key economic sectors and geographic regions associated with high poverty, as well as weakens public goods provision. Corruption de facto erodes the inclusivity of economic growth gains, which eventually contributes to imbalanced growth and inequality. Policy responses, therefore, need to consider the multi-faceted nature and implications of corruption and address its root causes. Reforms to improve competition in the economic and political spheres could help address some of the underlying features of rent-seeking behaviour and corruption. Given how these reforms run into deep political economy issues, a clear theory of change is necessary, touching on both the market economy and the political system.

The Philippines’ prolonged spell as a lower middle-income country has been a longstanding mystery in economic development. This article argues that the ‘Agricultural Trap’ is a key piece of the puzzle. The agricultural trap is characterized by low levels of transformation of agriculture, as well as slow structural change of the economy. Historically, the Philippine economy has undergone considerable evolution; nonetheless, by some indicators, the Philippine economy and agriculture remain in a relatively backward state. In recent decades, the Philippines has been unusually slow in its ability to increase agricultural output while reallocating workers away from agriculture. This in turn is driven by slow rates of growth of total factor productivity and capital formation, persistent farmholding fragmentation, inability to diversify the structure of agricultural output, and significant producer support for food import substitutes. Escaping the agricultural trap requires the pursuit of a modern agro-industrial policy.

The inability of government policies to improve basic education quality thus hampers the country’s progress towards upper-middle-income status. An empirical model is developed to determine how government education budgets in basic education—reflected by the differences in regional shares in basic education government expenditures—may affect wage returns to basic education. The empirical results indicate that increasing government budget shares in regions with lower schooling levels have failed to increase wage returns of schooling despite generating multiplier effects on aggregate demand. These suggest that the highly centralized programmes for basic education were not aligned with the conditions of the labour market, causing labour mismatches and underemployment for more educated individuals. Policies are provided considering these findings.

The Philippine labour market is characterized by a large and diverse workforce but faces significant issues, including adoption to continuing global technological changes in production. Addressing these challenges requires policies that target vital strategic industries for sustainable economic growth and job creation to fulfil its ambitions for the Filipino people in 2040. Using a computable general equilibrium model, we simulate the labour market in the 2024–2040 period, assuming growth targets with modest capital and technological factor productivity changes. The results show an increase in employment shares and presumably the share of value added overall in skilled and unskilled workers. The conduct of multi-sectoral employment planning summits from the national to regional levels as mandated by the recently passed employment law called the Trabaho Act would address issues related to productivity growth.

Concerns about climate change and the environment have shifted the spotlight to electric vehicles (EVs) as a critical component of sustainable transport. However, its diffusion has been slow in developing countries, especially in the public transport sector. We take the Philippines’ case to show that no one size fits all. For environmental, social and political reasons, the jeepney sector offers a promising niche for the Philippines to develop its EV industry. We use the socio-economic cost-benefit analysis to determine the feasibility of gradually replacing traditional jeepneys with e-jeepneys in various scenarios. Our analysis includes the avoided carbon costs and health costs due to reduced carbon emissions. We incorporate a higher purchase subsidy closer to the acquisition costs of e-jeepneys. The net socio-economic benefits of government investment in e-jeepneys are positive. We demonstrate the importance of building a roadmap and finding a niche in building the EV industry.

The intensity of research and development (R&D) that is necessary to accelerate innovation leading to economic growth is nuanced by industry needs, the readiness of end-users and the transition from R&D to commercialization. In the Philippines, the public R&D sphere is affected by a myriad of wicked problems: low budgets, complex procurement rules, missing markets that hamper technology transfer, lack of human resource complement and lack of clear and coherent vision on how to harness innovation to improve productivity. This article focuses on institutional issues that affect R&D growth in the Philippines. Using data from official budget sources and key informants from selected government agencies, we reviewed the institutional setup for the development and implementation of R&D programmes and projects (PAPs). We also identified the factors that either facilitate or hinder R&D growth and proposed policy recommendations and legislative action. We recommend that there should be an articulated vision of what type of innovation to focus on, complemented by policies to reform or relax bottlenecks regarding budgetary and procurement processes. To promote an R&D culture, the government may prioritize data sharing and provide a clear rationale on the roles, scope and limitations of existing and proposed research centres.