The Philippine government's announcement last week that the economy, as
measured by the gross domestic product (GDP), expanded by 7.1 per cent in the
third quarter was indeed a pleasant surprise. The expectation of local and
foreign economists and analysts was actually lower: anywhere between 3.9 and
5.4 per cent.
The third-quarter figure brought
economic growth in the first nine months of the year to 6.5 per cent, much
better than the dismal 3.9 per cent in the same period last year. In 2010, GDP,
or the total value of goods produced and services rendered for a given period,
expanded by 7.3 per cent—the fastest in decades.
President Aquino and his economic
officials have reason to brag about the third-quarter growth, considering the
harsh global environment that had been weakened and threatened by the lingering
debt crisis in Europe and the fragile US economy. The government itself is to
be credited for part of the GDP expansion.
The economic weakness in 2011 was
traced to the inability of the Aquino administration to spend enough on vital
infrastructure projects mainly due to its anticorruption campaign, which led
every agency to scrutinise every expenditure item, eventually causing
implementation delays. Government expenditures grew a measly 1 per cent in
2011.
In contrast, the government
boosted its spending by 24 per cent in the first quarter, 6 per cent in the
second, and 12 per cent in the third.
The other factors that
contributed to the third-quarter performance were the 4.1-per cent expansion in
agriculture (up from 2.7 per cent in 2011 and 1 per cent in the first six
months of this year), the 8-per cent increase in industrial production, and the
7-per cent growth in the service sector. This last component is worth
mentioning because it accounts for more than half of the country’s GDP.
There is nothing wrong with
consumer spending (mainly by beneficiaries of OFW remittances and BPO workers)
driving the economy. It’s just that what is more essential—and with more
lasting effects—is economic growth driven by investments in factories,
airports, roads and other infrastructure. Investment grew by only 4.3 per cent
in the third quarter, slower than the previous quarter’s 7.3 per cent.
Investments fell 20 per cent in the first quarter of 2012.
But amid the euphoria generated
by the surprising GDP growth, it is imperative for the Aquino administration to
now focus its attention on generating investments in the so-called
brick-and-mortar businesses that generate jobs. It can start by addressing the
obstacles. Private businessmen have complained about a lot of things, but three
major issues always stand out: very steep electricity rates, changing rules on
investments, and lack of basic infrastructure.
Electricity rates will remain
high in the next few years, or until the various additional baseload power
plants and facilities running on renewable energy come on stream. The Aquino
administration is also neglecting to address the constantly changing investment
rules (its recent issuance of new guidelines on mining is a case in point).
The only bright spot we see so
far is on government spending on basic infrastructure. Only last week, the
board of the National Economic and Development Authority chaired by President
Aquino approved 105 billion peso (US$2.5 billion) worth of roads, bridges,
classrooms and power plant projects for implementation in 2013.
The government’s promise to
finally speed up its flagship PPP (public-private partnership) programme is
also moving in the right direction.
Also last week, Transportation
Secretary Joseph Emilio Abaya ordered the tapping of private lawyers to
expedite the bidding process for billions of pesos worth of public
transportation and communications projects to be done through the PPP.
A study by global financial giant
Citi Group rightly indicated that public infrastructure spending could be the
medium-term “game changer” for the Philippines, predicting that the massive
flood works programme alone of the Department of Public Works and Highways
worth 325 billion pesos can potentially lift per capita income to $3,500 within
five years.
A year of spectacular growth will
not lift the Philippines to the ranks of First World nations, nor will it wipe
out poverty. But it is a good starting point for the government to shift focus
from economic growth to economic development, and to work on making the
Philippines a prosperous nation with ample economic opportunities that can
eventually lure Filipinos overseas to come home, for good.
*US$1=40.9 pesos
Editorial Desk
Business & Investment Opportunities
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