In the euphoria surrounding the high GDP growth in the first quarter (the highest in East Asia) the Philippine Government may become complacent and fail to address some of the challenges still facing the Philippine economy in the coming decade or so. The next three years will be crucial if we are to take advantage of the growth momentum coming from rising domestic consumption, the revival of manufacturing, the continuing high growth of such services as BPO and tourism, the housing boom and the sterling performance of the Department of Public Works and Highways in accelerating the construction of vital infrastructures, especially in the regions outside of Metro Manila. Before these engines of growth run out of steam, it is important that the Government address the still very low rate of investments to GDP (the lowest in East Asia), the mediocre level of Foreign Direct Investments (FDIs), and the very slow process of implementation of transport and communications projects (the Department of Transport and Communications is the weakest link in the government bureaucracy).
As another encouraging sign of institutionalization of the development process, the Philippine Business Groups, which included the foreign chambers of commerce, made a series of recommendations to President Benigno S. Aquino III on what should be done over the next three years so that high GDP growth of 7% to 9% can be sustained for the rest of the Aquino Administration and beyond. The memo to the President started out with an objective evaluation of the successes of the Government in providing the appropriate environment for high and stable growth: “Since 2010, the Philippines has seen a resurgence in confidence, both in the economic side and in terms of governance, led by your administration’s reforms towards a more transparent, fair and inclusive nation. The impressive economic growth rates, achievement of investment grade ratings, improving national competitiveness, and a palpable optimism and vigilance against corruption within the people are testaments to your leadership and the management of your Cabinet.”
Following these complimentary remarks, the Business Groups enumerated very specific projects, programs and policies that the Government has to shepherd to sustain the high growth, especially as the Philippines will have to face stiffer competition among its ASEAN neighbors with the full implementation of the ASEAN Economic Community project in 2015. There is also the added incentive to showcase the Philippine economy with our hosting the APEC Summit, also in 2015. To my mind, though, the Business Groups may be overpromising when they refer to “inclusive growth.” Most of their recommendations will not really directly uplift the conditions of the poorest of the poor, who can only be helped by the direct assistance of the State together with NGOs in formulating social assistance programs like the Conditional Cash Transfer Program, a more focused agrarian reform program, socialized housing, and higher expenditures on basic education and primary health care of the poor, etc. The Business Groups should not hesitate to state that their recommendations will help to guarantee continuing high economic growth rates. That would be already sufficient contribution to poverty eradication because from the experiences of emerging markets like China and India, two thirds of the success in reducing the poverty rate can be attributed to high economic growth, even if inequalities persist. The other one third is the responsibility of the State and civil society.
Among the salient recommendations are the acceleration of transportation infrastructure projects, some of which are in the Public-Private Partnership pipeline such as the main international gateway, the de-clogging of the Port of Manila and connecting NLEX and SLEX; the enacting of an effective anti-trust and competition policy; the overhauling of the Bureau of Customs and the creation of an oversight body with private sector representation and the passing of the necessary law to fulfill our commitment to the International Convention on the Simplification and Harmonization of Customs Procedures, or the Revised Kyoto Convention. Other salient recommendations are the rationalization of existing incentive-giving laws and the more efficient coordination, reporting and monitoring of the activities of investment agencies; the reaffirmation of the existing Philippine Mining Act while providing for a stable regulatory environment that will increase investor confidence; swift implementation of projects that will address the shortage and high cost of power; and the implementation of reforms that would address issues of competence and efficiency in the justice system.
The Business groups gave their full support to initiatives in the Philippine Congress to amend the economic provisions in the 1987 Constitution. From their own personal and corporate experiences, these leaders from the various local and foreign chambers, business advocacy groups like the Makati Business Club and professional organizations like the Management Association of the Philippines and the Financial Executives Institute of the Philippines entertain no doubts that such constitutional provisions as banning foreign equity participation in media and education, restricting foreign equity participation in public utilities to only 40 percent, disallowing foreigners from owning residential and industrial land, among others, inhibit greater private sector participation in strategic sectors that are vital to long-term economic growth. Even if the constitutional amendment process may take time, they also suggest that there be major revisions in the Foreign Investment Negative List by reducing the number of industries where foreign participation is limited. There was special mention of the wisdom of RA 10574 which allows the infusion of foreign equity in the capital of rural banks. By allowing up to 60% foreign ownership in rural banks and allowing them to accept real property mortgage and take possession of such up to five years, there will be less rural banks that have to be closed (closure have been averaging 20 every year). We have to rejoice that the private sector is playing a very proactive role in helping the Philippine economy to sustain its high growth over the coming years by coming out with a very specific action program that it would like the Government to undertake. We can be sure that business firms, big, medium- and small-scale will exert all the effort necessary to raise the rate of investment to a higher level of 25 to 30% in the coming three to five years.
Source: Dr. Bernardo M. Villegas, Manila Bulletin, September 15, 2013
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