Joachim von Amsberg, WB country director for the Philippines said the passage of the 2007 national budget is also a welcome development that would provide the appropriate framework for public expenditure.
"The leaders of the county and (President Arroyo) reinforced this today knowing that credibility in macroeconomic management is so important for bringing investments into the country, for strengthening investment climate, that they all stand behind meeting those targets," Amsberg said.
He said concerns on excess spending ahead of the May midterm elections will not adversely affect the government’s fiscal targets.
"I think I would encourage government leaders to focus on strengthening the quality of public spending. I believe the discipline is in place to ensure that spending is not out of control but the key is to ensure that the quality of spending is raised," Amsberg said.
He said the implementation of fiscal reforms and the passage of the national budget would create the opportunity to increase public spending into social and infrastructure areas.
If those investments were made with "high quality," Amsberg said public infrastructure and social spending could actually make a very important contribution to more rapid growth and poverty reduction in the Philippines.
The WB official said the Philippines’ efforts in macroeconomic management are beginning to be noticed by the international community, indicating that Manila has actually exceeded its fiscal plans which were laid out by its economic managers in the previous year.
"What we are seeing is the beginning of… circle of credibility which is, government makes announcements about its fiscal plans... which means investors and other observers begin to take those plans and projections seriously because they have track record of achieving those projections," he said.
Amsberg expressed confidence the Philippine government will sustain its economic targets for this year as it did last year.
Amsberg said the economic reforms could be sustained on the government’s will and commitment.
"For 2007, it is a significant challenge to meet increased revenue collection because those increases have to come from increased tax collection policy because there are no new measures put in place. That requires a very serious commitment that I do see in the Department of Finance and BIR (Bureau of Internal Revenue) but needs to be sustained," he said.
Amsberg said the government must undertake tax audit, go after tax evaders and enforce tax laws to leave a message to taxpayers that they have no choice but to pay their taxes.
He said a lot of actions are necessary to enable the government to meet its revenue targets through better tax collection rather than new tax measures.
There should also be more transparency in spending and money should be invested in programs with the highest returns.
Amsberg also stressed anti-corruption efforts should be implemented thoroughly with the results disclosed to the public.
"So over time the services that are delivered for every peso spent increases. There is a lot of space for the increase in the effectiveness and efficiency of public spending," Amsberg said.
He said some important steps had been taken and the fiscal reforms were the single most important move to improve the investment climate and "a lot more can be done to sustain the positive performance."
"Even though growth has been reasonably high, the investment rate is still very low. Raising the investment rate is a big challenge in the coming years," Amsberg said.
"That’s where the investment climate reforms are central. Sustaining fiscal reforms, good infrastructure investment and clean competitive bidding for infrastructure investment with private sector participation," he added.
Amsberg said investors will put more money into real investments if they see contracts are equally enforced with no political interference from government institutions.
He said concessions should be bidded out cleanly and competitively, "so there’s a whole agenda of investment climate governance reforms that could lift the Philippines to the next higher level of sustained growth and growth that is spread to the different parts of the country and different sectors."
Amsberg also stressed the government should make more efforts in cutting down the bureaucratic red tape.
"There has been initiatives and more actions in cutting red tape would help investors increase their commitments in the Philippines," he said.
Amsberg described red tape as "simply administrative barriers."
"They extend to a broader set of governance related issues of how the private sector interacts with the State and how competition in the private sector is supported or undermined by the State," he said.
Amsberg pointed out some issues which are deemed critical to the country’s economic success.
Amsberg cited the airlines industry sector, which he said, could bring more competition that could reap huge benefits. He also cited the seaport industry.