world bank on poverty

World Bank: Integrate leading and lagging regions to cut poverty

Jesus F. Llanto /Newsbreak/1.12.2009

Economic integration of highly developed urban areas and poor far-flung areas will help reduce poverty and result in inclusive economic growth, economists from the World Bank said in their World Development Report 2009. Contrary to the belief that distributing economic activities from the urban centers to remote areas will reduce poverty and spur growth, it is the economic integration of the urban centers and far-flung areas that will boost economic development and cut poverty, said World Bank economists during a presentation of the report, entitled Reshaping Economic Geography, at Makati City today. “The reality is that interaction between leading and lagging places is the key to economic development,” said Indermit Gill, director of the WDR and WB chief economist for Europe and Central Asia. Gill said that economic growth tends to favor some regions and this is the reason why economic activities tend to be concentrated on some areas. “Economic growth is seldom spatially-balanced.” “The world is not flat. Markets favor some places over the others. To fight this concentration is tantamount to fighting prosperity,” Gill added. Forget geographic targeting Business activities in the Philippines, Gill noted, are concentrated in Metro Manila, its two neighboring regions—Central Luzon and CALABARZON—and in a few cities like Cebu, Davao and Cagayan de Oro. The World Development Report 2009 noted that current policy debates on urbanization, area development, and globalization tend to emphasize geographic targeting, which focuses on what to do in rural areas or slums, what to do in remote areas, among others. The report, according to Mr. Gill, reframes these debates in a way that better conforms to the reality of growth and development. Experts said that the process of redistributing economic activities in other areas will not successfully induce growth and reduce poverty. “It’s like building more mediocre libraries than building one effective library,” said Arturo Corpuz, vice president for Urban-Regional Planning of Ayala-Land Inc. Instead of providing incentives to spur investments in these places, governments, economists said, should implement policies ensuring economic density and people’s access to economic opportunities in the growth centers. Iloilo City mayor and League of Cities of the Philippines national chair Jerry Treňas, said national government should identify metro areas where there is a concentration of population and investments and should support them to sustain growth. “Anemic growth” Arsenio Balisacan, director of Southeast Asia Regional Center for Graduate Study and Research and Agriculture (SEARCA), noted that the Philippines has experienced anemic economic growth, has a disappointing poverty reduction performance and “persistently high spatial disparities” when it comes to living standards. In a paper he co-wrote with Hal Hill of Australian National University and Sharon Faye Piza of the Asia-Pacific Policy Center, Spatial Disparities and Development Policy in the Philippines, Balisacan noted that economic activity in the country has been highly uneven and concentrated particularly in Metro Manila, which accounts for 55 percent of the country’s gross domestic product (GDP). “The challenge is to allow unbalanced economic growth and inclusive development in a regime of weak governance,” Balisacan said. High population growth rate Balisacan added that the curbing high population growth rate in the country will also address the issue of slow economic growth. As of August 2007, the Philippines has a population of 88.57 million and its projected population for 2009 is 92.23 million. From 2000-2007, average annual population growth rate in the Philippines reached 2.04 percent. “Very high population growth puts too much strain in our fiscal and development resources,” Balisacan said, adding that the country’s population growth pattern failed to move from high dependency population to high working age population. Balisacan added that the failure to move in transition makes the country lose 0.7 percentage points of economic growth and prevented 3-5 million Filipinos to move out of poverty in the last five years. Focus on infrastructure Balisacan noted that the Philippines has been under investing in infrastructure, particularly transport and electricity. “This not only reduces overall growth, but also limits domestic mobility of factors, foods and people, hindering the full participation of lagging regions from the growth process in leading regions or urban centers,” Balisacan said. The Philippines lags behind its neighbors when it comes to spending on infrastructure. While its neighbors spend around 5 percent of their GDP on infrastructure, the country spends only around 2.3 to 2.5 percent. A 2007 study by the World Bank and the Turku School of Economics ranked the Philippines 86th out of 150 countries in terms of adequacy of infrastructure. Bert Hofman, WB country director said that the poor in remote areas would benefit from the investments in infrastructure. “The poor would benefit more by efficiently connecting the lagging regions and provinces to the growth centers through investments in infrastructure including transport, communication, and information technology and better education that allow them to engage in economic activity more productively,” Hofman said. Basic services, too Experts said that providing access to basic services like education, water and electricity to all regions should also be prioritized. “Economic activities will remain concentrated in few cities but policymakers could ensure convergence of living standards across country through carefully designed policy and public investments in social services like health, education, housing, and social protection in both urban and rural areas,” Gill said. Balisacan added that ensuring access to these services will also help prevent conflicts in the country since division in the access to basic services is also one of the causes of conflicts in areas like Mindanao. Meanwhile, Chorching Goh, senior economist at the Poverty Reduction and Economic Management Unit in Europe and Central Asia, said that the government should spend more for and enhance the quality of education. “Education will help them to overcome division to be able to access jobs in urban areas,” Goh said. Land policy Balisacan added that the country should also “relax land conversion policies” because these policies, particularly the “strict” regulation of land conversion”, have become constraint in attracting business. “It’s extremely difficult to convert agricultural land to lands for housing and industrial use,” Balisacan said. “The Comprehensive Agrarian Reform Program (CARP) is applied uniformly in urban areas and far-flung areas,” he added. (abs-cbnNEWS.com/Newsbreak)