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Pace of investments trails Philippine economic growth, experts say

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MANILA - Despite its phenomenal economic growth last year, the Philippines' investment rate still lags that of its neighbors, experts said on Wednesday.

In a forum, Joseph Yap, president of Philippine Institute for Development Studies, (PIDS) said the country's investment-to-GDP ratio stood at 19.7 percent last year, only slightly higher than the 19.1 percent in 2011.

"It has not taken off, " Yap said, comparing the Philippines' ratio to that of Indonesia, which already surpassed its pre-Asian financial crisis ratio of 31 percent.

The marginal increase in the Philippines' investment rate lags the pace of expansion of the country's gross domestic product, which last year grew 6.6 percent, or above the government target range of 5-6 percent and higher than the country's trend-growth of five percent in the last decade.

In contrast, Indonesia's investment rate stood at 33 percent in 2011, while that of Thailand and Malaysia at 27 percent and 24 percent, respectively.

"We haven't reached 25 percent -- there's really a problem," Yap said.

Under the Philippine Development Plan 2011 to 2016, the Aquino administration is aiming for a 22 percent investment rate by 2016 and GDP growth averaging 7-8 percent a year. The country's economic blueprint also aims to create one million jobs a year.

In the same forum, International Monetary Fund director for Asia and Pacific Anoop Singh said aiming for seven percent GDP growth would require higher investment rates as well as improvements in labor productivity.

"It can be done, but it needs a lot of reforms," he said.

Singh said investment is "very important" to sustain growth in the Philippines, thus the need for government to raise more revenues.

"Low fiscal revenue leads to low public investment," he said, adding that the Aquino administration should cut fiscal incentives.

He said the government should open up the economy to entice more foreign investors.

"You have to convince foreign investors to bring money not for short term, but in areas of growth in the medium term," he added.

 

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