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Operation Zero: The call for economic liberation

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Christian G. Lauron

Suits The C-Suite

(Second of two parts)

In the first part of this article, we offered the context and background of the Zero Dropout Education Scheme (ZeDrEs or Zero Dropout) program, which was envisioned by the late SGV Founder Washington Z. SyCip and implemented by the Center for Agriculture and Rural Development — Mutually Reinforcing Institutions (CARD-MRI). We discussed how the program has benefited thousands of children from families considered among the “Poorest of the Poor” and the steps taken by the SGV’s ‘Operation Zero’ teams in conducting an impact assessment for the program.

Also taken up were the definition of extreme poverty, and the seemingly persistent relationships among discontinuing schooling, poverty and the dearth of quality and connected infrastructure, not to mention political governance.

There is no doubt that cases of extreme poverty need to be dealt with immediately, and the social spending involved should be delivered to the rightful beneficiaries with zero friction costs and leakage. In certain locations, our teams encountered unconfirmed reports of social service payments not reaching the appropriate families.

One policy point being considered is to explore a blockchain-based utility to handle the social service disbursements, which will run parallel to the conduct of financial literacy programs, payment channel modernization and distribution of basic deposit accounts. The goal of social service spending is to help the affected families and persons strengthen their self-respect by ensuring that the temporary help is replaced by the primacy and dignity of work, labor and entrepreneurship.

With this view, social spending is viewed as investment in people’s ability to eventually govern themselves. The focus is less on narrowing the income gap per se, but to make the needed investments to elevate those in the bottom of the pyramid while being mindful of the unintended issue of the “middle-class trap.” The situation is not to give dole-outs, but for people to become economically productive by being able to make sound decisions and be accountable for their decisions. In bridging the income disparity, development must be given priority.

Reframing Development and a Corridor Approach to Socio-Economic Development

Development is such a complex and multi-faceted matter that a framework is needed, particularly in helping the government and the private sector shift from a macro-economic orientation to socio-economic and geographic perspectives. This framework — parts of which were covered during discussions with local government planners depending on our economic assessment – should cover at least the following areas and the corresponding impact measures:

1. Enabling environment — Infrastructure development

2. Sustainable growth — Micro, small and medium enterprises (MSME) development and access to finance

3. Human capital — Skills development and innovation

4. Shared growth — Livelihood enhancement

5. Competitiveness — Increasing city attractiveness

6. Ease of doing business — Business climate reforms

The Operation Zero teams previously recommended that the elements of the framework be semi-spontaneously and rigorously planned and executed yet quickly through nine proposed socio-economic corridors aside from Metro Manila: Davao-ARMM-SOCCKSARGEN; Northern Mindanao-Central Visayas; Zamboanga Peninsula; Bicol-Eastern Visayas-CARAGA; Cagayan Valley-Aurora; MIMAROPA; Western Visayas; Ilocos-CAR; and Central Luzon-CALABARZON.

This corridor approach to socio-economic development balances the demand and supply forces and bridges development and business. Its operating principles are:

1) Prosperity and growth are tracked by banking, which follows trade flows.

2) The “velocity” of trade flows is a function of development and mobility.

3) Development progresses with the presence and use of shared roadmaps and credit and investment enablers.

4) Mobility is a function of integrated supply chains, infrastructure and connectivity.

Which areas to prioritize?

The nine redrawn economic corridors have been categorized as follows: four frontier corridors, three super-growth corridors and two emerging corridors. This categorizations would in a way dictate the budget spending and investment allocation as well as financing strategy. The developing methodology and assumptions include six clusters of variables, three structural risk issues, and three impact outcomes (jobs, regional GDP per capital, household prosperity formation); public investment assumed as a constraint and allocated amount a subset of the overall financing and investing strategy; instrumentation (e.g., guarantee, sovereign financing) can vary depending on the projects and programs; and, ranking and prioritization of programs and projects based on impact outcomes and capital allocation. All development and economic planning would have to be done immediately by corridors, without waiting for executive orders and legislative actions, for the relevant agencies and entities to collaborate and act immediately.

Within this framework, we have evaluated and identified three areas that would have the greatest impact to significantly cutting poverty and promoting intergenerational growth — education, agriculture, and infrastructure. In the upcoming articles, we will provide our points of view on accelerating and sustaining growth from these areas. To avoid any ideological debate, we need to have an anchor for the framework. To our mind and to reiterate, it should be about generating employment, as a nod to the dignity of work, labor and entrepreneurship.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the authors and do not necessarily represent the views of SGV & Co.

 

Christian G. Lauron is a Partner of SGV & Co.