Study: Multi-sectoral reform key to lasting PH growth-A A +A
Monday, October 7, 2013
WITH its economic growth accelerating to historic highs, the Philippines today faces a "unique window of opportunity" to implement a comprehensive reform agenda across sectors that can lead to the long-awaited private sector development, inclusive growth, and significant job creation, according to a World Bank country report released recently.
The draft "Philippine Development Report 2013" is recommending that a "comprehensive reform agenda" be implemented across sectors to foster a business environment that is genuinely conducive to private sector growth and job creation.
The foundation needed for the Philippines to achieve more inclusive growth is in place, the report points out. "The country is benefiting from strong macroeconomic fundamentals, political stability, and a popular government that many see as committed to improving the lives of the people."
But it warns that the country needs to overcome the significant challenges posed by some of the country's political and economic institutions that are bent on concentrating power and opportunity "in the hands of a very small subset in society."
The report identifies a number of major reasons why the Philippines has failed to actualize its economic potential. One is its long history of distorted policies that slowed the growth of agriculture and manufacturing in the last six decades.
"Instead of rising agricultural productivity paving the way for the development of a vibrant labor-intensive manufacturing sector and subsequently of a high-skill services sector, the converse has taken place in the Philippines," it notes. "Agricultural productivity has remained depressed, manufacturing has failed to grow sustainably, and a low-productivity, low-skill services sector has emerged as the dominant sector of the economy."
The other factors are the lack of competition in key sectors, insecurity of property rights, complex regulations, and severe underinvestment by the government and the private sector.
All this has led to a growth pattern that the World Bank says is not the norm in the East Asia region.
"This anomalous growth pattern has failed to provide good jobs to majority of Filipinos and has led to a substantial outmigration of many of the country's best and brightest people," said the report.
The creation of a broad reform coalition made up of government, business, and labor working together to institute changes will nurture this inclusive growth that has eluded the country for so long.
"To put the country on an irreversible path of inclusive growth, it is crucial to have a broad reform coalition-that is, a multi-sectoral group representing many interests to address diverse options," the report emphasizes.
"Without such a broad coalition, reforms made under a strong president can be reversed, as the country's history had shown," it added.
Instead of tackling policy reforms one by one, "which would generate powerful opposition from vested interests," the World Bank said the reform coalition can introduce a package of reforms agreed upon by government, business, and labor, with the support of civil society.
The report recommends that the reform coalition agree on certain responsibilities and principles.
On the government side, it could prioritize programs and reform measures to help reduce food prices, ramp up investments in rural infrastructure and support services, provide universal social and health insurance at higher quality, and co-finance training and apprenticeships programs for disadvantaged groups and young workers. Finally, it could simplify the tax code and business regulations to promote competition and encourage the growth of entrepreneurship.
For the private sector, businesses of all sizes could embrace the principle of a level playing field and extend their corporate social responsibility to their own employees. This involves businesses supporting the making of all tax holidays and other fiscal incentives temporary, supporting freedom of association and collective bargaining, committing to offer more training opportunities for workers, and improving the link between wages and productivity.
On the part of workers, labor groups could agree to recognize valid forms of flexible contracts and reduce calls to hike minimum wages as food prices fall.
And civil society will have to be an active agent of change and serve as a watchdog over governance and adherence to coalition principles and objectives.
"Successful implementation of such agreements could help the country revive agriculture, boost manufacturing, and in the process create more and better jobs," the report concluded. (Philexport)
Published in the Sun.Star Cagayan de Oro newspaper on October 07, 2013.