Charter change needed to achieve high economic growth
A combination of constitutional amendments and improvement in infrastructure are needed to achieve a sustained growth of 7 percent or more in the coming years.
Advisory and research consultancy group Stratbase Research Institute (SRI), in the latest issue of its online newsletter Spark, said while the economic growth in the third quarter of 2013 is laudable, it is too early to offer congratulations.
“If one takes a longer view, the country has yet to establish a sustained growth record. The pattern is more boom-and-bust and growth has never exceeded double-digits. Taking population growth into account will reduce the country’s per capital growth rate even further,†Prof. Victor Andres C. Manhit, president of SRI, said in the 16-page report titled Ready to Compete? An Assessment of Philippine Competitiveness, Trade and Foreign Direct Investment Regimes.
The report aims to present an analysis of the progress made and challenges faced by the Philippine economy under the Aquino administration. It also offers insights on the importance of amending economic constitutional provisions and free trade agreements as they affect the competitiveness of the Philippine economy.
The Philippines’ gross domestic product grew 7.1 percent in the third quarter of 2012, second only to China’s 7.7-percent expansion during the same period. Prof. Manhit, however, said the country needs to improve its competitiveness against other Asian economies, if it is to sustain such high-growth level.
“It is imperative that the Philippines improve its competitiveness so its economy can grow and meet the requirements of its growing population and for the nation to play its proper role as the 12th most populous nation in the world. The lack of will and imagination should not keep this goal beyond the Filipinos’ reach,†he said.
Foreign direct investments (FDIs) in the Philippines reached $1.1 billion in the first three quarters of 2012, up by 40 percent from $782 million a year ago. The figure, however, was miniscule compared to FDIs going to other Asian countries.
Prof. Manhit noted that the Global Competitiveness Report 2012-2013 of the World Economic Forum (WEF) ranked the Philippines 65th among 144 countries, a jump from 75th place in 2011. Nevertheless, the same report noted that the country is still in a transition phase between a factor-driven economic stage and an efficiency-driven economic stage.
Within Asia, Brunei, China, Hong Kong, Indonesia, Japan, Malaysia, South Korea, and Taiwan are all at a higher stage of development than the Philippines, according to the WEF metrics.
“Overall, the most problematic factors for doing business in the Philippines are corruption, inefficient government bureaucracy and inadequate supply of infrastructure,†he said.
He said the Philippines seems to be mired in transition between stages of economic development. While it has a sophisticated financial market, stable macroeconomic environment, capacity to absorb new technology and a sizeable market, the country is stymied by weak institutions, an inefficient bureaucracy and inadequate infrastructure that together raise the cost of doing business and make the country a not-so attractive destination.
Prof. Manhit therefore cited the need to amend the 1987 Constitution to allow more foreign investments into the country. “Arguably, the bold steps that must be taken include amending the 1987 Constitution in the less controversial manner possible. Changing the basic law of the land will help improve climate for foreign investments and enhance competitiveness. Artificial market restrictions will either be removed or reduced on a phased basis to ameliorate local sentiment,†he said.
He also stressed the importance of improving infrastructure. “Providing adequate physical infrastructure must be a continuing concern given the regular damage wrought by natural disasters. If these tasks are met, high-growth and economic prosperity for Filipinos will result as a matter of course,†he said.
Prof. Manhit said the challenge confronting the Philippines is borne by the fact that it is located in a region considered to be one of the most dynamic and attractive investment destinations. “While investors are quite sceptical that the Association of Southeast Asian Nations (ASEAN) will achieve its ASEAN Economic Community goals by 2015, ASEAN economic integration is considered positively. However, unless the Philippines remedies its infrastructure inadequacies and broad governance problems, among others, the country will be unable to capture enough investments needed to fuel its economic growth,†he said.
The picture offered by Doing Business 2013 of the World Bank is darker as the country is ranked third from the bottom among Asian countries in ease of doing business by local small and medium-sized firms.
While the country’s overall rank in ease of doing business is 138th among 169 countries, it is in the area of resolving insolvencies (165th) and starting a business (161st) where it fares the worst. Other areas of concern include paying taxes (143rd), getting credit (129th), protection of investors (128th) and registering property (122nd). — Stratbase Research Institute
(Stratbase provides clients with snippets of the economic and political developments in the country on a quarterly basis. Both are aimed at providing a macro description of the fundamental indicators of economic and political trends in the Philippines.
On a quarterly basis, Stratbase issues Spark, an online newsletter that covers socio-political and economic analysis of timely issues that affect the direction of the economy and political landscape governing the Philippines.)
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