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MANILA – There is a reason to be optimistic about the Philippines these days, but this must be tempered by the need to address the slow pace of legislative reform and the lack of policy coherence, an economist said on Friday.
During the UPinyon: SONA Forum, Filomeno Sta. Ana III of Action for Economic Reforms (AER), said there is optimism in the air and the bases for this are:
- The economic growth of 6.4 percent in the first quarter;
- The credit rating upgrade by Standard & Poor's, which can lead to the Philippines attaining investment grade status once pending legislative reforms are passed; and
- Perception that the Philippines is the "breakout nation" or the next economic miracle.
In his presentation, Sta. Ana said previous administrations - from Marcos to Arroyo - had forecast the domestic economy would grow by 7 percent, but failed to answer the question of sustainabability. In contrast, China and Vietnam are capable of growing at this pace for more than a generation.
In order for the Philippines to achieve this kind of economic growth that is inclusive, the Aquino administration must address binding constraints it inherited, such as:
- Corruption and unpredictability of rules;
- Low revenue collection or low tax effort; and
- Inadequate and weak infrastructure.
Sta. Ana said the problem before was that various sectors were clamoring for change across all issues at the same time. To make a dent on poverty, it is more important to address the above binding constraints or narrow set issues, Sta. Ana said. Some of these are:
- Expensive electricity,
- Weak private investments, and
- Currency overvaluation.
"Our problem with energy is maaring di natin nararamdaman yan ngayon pero pumutok na yan ngayon sa Mindanao," Sta Ana said.
"Strong peso magandang pakinggan yun pero sa ekonomiya nakakasama yan dahil sa nagmumura ang imports na kumakalaban sa local products at nagmamahal ang exports," he added.
Moreover, a strong peso would be detrimental to OFWs since this means the value of their remittance has shrunk.
Sta. Ana noted that it is a great contradiction since the country is courting foreign investors that would bring in more dollars to the country, which in turn cause the peso to strengthen.
"At least the BSP now is more sympathetic to the real economy by defending the dollar but the question is does the BSP have the tools to address this?" the economist said.
He said the central bank must take the initiative to use capital controls to stem the further stengthening of the local currency against the greenback.
Addressing the contraints
The Aquino administration is addressing the binding constraints through:
- Daang Matuwid by filing of corruption and plunder charges against Arroyo and removing former Chief Justice Renato Corona; Bureau of Internal Revenue's Run After Tax Evaders, the Open Government Program, including the Freedom of Information Act;
- Tax reform legislation; and through
- Public-private partnership.
"Alam natin hindi sapat ang PPP to address ang kakulangan sa infra projects and it is understandable kasi kulang ang resources ng government. Dapat ma-identify alin ang projects na mataas ang social returns," Sta Ana said.
Some of the challenges that the Aquino administration must overcome are:
- How to speed up the process of legislative reform, especially since many traditional politicians do not have the commitment and zeal of the reformers;
- Fix the policy differences within the Aquino administration, which slow down the reform process.
"For example, Sen. Osmena believes EPIRA should not be touched but Rep. Abad sees that the problem with EPIRA is that it failed to address the market failure. In the 1990s, the buzzword was liberalization but hindi lang pala ganun yun," Sta Ana said.
"Despite the liberalized regime, investors still do not want to invest," he added.
The biggest challenge that Aquino must hurdle is the lack of quality jobs for all. Sta Ana. said there is a great disparity between jobs in the formal and informal sectors.
The growth of the business process outsourcing industry has helped in offering more jobs to Filipino graduates. However, the industry cannot absorb all graduates and undergraduates since many from the non-elite schools could not clinch spots in these companies.
The key is to boost the manufacturing sector that could offer more work but economists fear the formation of an industrial policy because this is captured by the elite.
"But we cannot avoid this industrial policy for the manufacturing sector to grow," Sta. Ana said.
Sta. Ana was one of the resource persons at the “Online Onsite” event of InterAksyon.com, which brought the modern, digital newsroom to the University of the Philippines, to involve “the community” in gathering news and information and feeling the public pulse on the eve of the State of the Nation Address on July 23.
The forum held at Palma Hall also featured Felipe Miranda of PulseAsia and Glenda Litong of Free Legal Assistance Group and was moderated by TV5’s multi-awarded host Lourd de Veyra.
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