ASIA NEWS NETWORK
WE KNOW ASIA BETTER
Philippines said to bear unmistakable signs of a turnaround
Publication Date : 22-05-2014
The Philippines is well poised to ride the global manufacturing wave and stand out among the economies in the Asia-Pacific in the next two decades, but the government needs to implement crucial reforms to address issues on foreign ownership, corruption, infrastructure and energy.
According to a report released by Deloitte Touche Tohmatsu Ltd. entitled “Competitiveness: Catching the next wave, the Philippines,” the strong growth in global manufacturing through 2033 will be a major driver of world growth, and the country has a great potential to integrate more fully into what has become a global supply chain of high-value manufacturing.
“If the government makes smart investments in infrastructure - including roads and harbors - that would help boost the construction and transportation sectors, and lead to higher productivity growth in the coming years,” said Gary Coleman, managing director for global clients and industries at Deloitte Global.
“Relaxing limits on foreign ownership could boost foreign direct investment, increase efficiency and prompt higher levels of competition,” said Chaly Mah, chief executive officer of Deloitte Asia Pacific. “Additionally, the government should look to public-private partnerships to help speed investment spending on infrastructure, reduce bottlenecks, and implement policies that promote inclusive economic growth.”
As it is, the Philippines bears the “unmistakable” signs of an economic turnaround, including a marked improvement in the business climate and the successful conclusion of peace talks in Mindanao.
Investments infrastructure, better governance, and a concerted effort to reduce corruption and red tape, have boosted economic performance and, in turn, sparked higher business confidence in the country’s growth potential, the report added.
This growth is expected to be sustained over the long term.
“Over the next two decades, we expect the Philippines will grow somewhat faster than the rest of Southeast Asia, with overall GDP expanding by 4.8 per cent per year in the 2014-2033 period. This very favorable growth outlook assumes that the government continues on its path of reforms to improve confidence in the business sector, that regulations regarding foreign ownership are relaxed, and that the government transparency improves. It also assumes that infrastructure spending rises from its 2012 level of just 2.7 per cent of GDP,” the Deloitte report stated.
“This projection assumes delays in implementing a series of PPP projects, which means that bottlenecks on the utilities and transport sectors will persist. It also assumes that stronger growth in the manufacturing sector will successfully absolve some of the lower skilled workforce but, with investments in human capital lagging, the Philippines will continue to specialise in low- to medium-value added products. Naturally, more aggressive public investment and a reduction in some of the long-term bottlenecks would meaningfully boost the nation’s growth.”
As such, the Aquino administration will need to implement more critical reforms to enable the Philippines to maximise the opportunities presented by this economic momentum, specifically for the identified “growth drivers,” which include construction, manufacturing, communications and the business process outsourcing industries.