A STUDY done by the Philippine Government and the United States Agency for International Development (USAID) identifies four things that constrain the Philippines from growing in a way that it ought to.
Since November 2011, USAID mission director Gloria Steele said, the Philippine Government with their help has accomplished much in overcoming these constraints.
The study identified narrow fiscal space; weak governance due to corruption, an inefficient judicial system and poor regulatory quality; weak human capital; and inadequate public infrastructure as binding constraints to Philippine growth. The study was conducted due to a partnership for growth between the US and Philippines, a “whole-of-government effort to unlock the growth potential of partner-countries to become the next generation of emerging markets.”
Using resources better
Steele said that the USAID’s part was merely to provide technical assistance. The major policy changes were implemented by the Philippine Government.
In expanding the Philippine fiscal space, Steele said the lack of revenue was not the only challenge, but the poor allocation of resources. They worked with the Bureau of Internal Revenue and the Department of Finance to change the way taxes were collected. They introduced the e-filing system to minimize face-to-face contact and eliminate chances of corruption. The BIR also began comparing projections with actual collections.
They launched an open government partnership that introduced budget transparency, allowing the public to give an intensive review of the national budget. Steele said this makes citizens aware of the budgeting process and that the Philippines was recognized among its 63 partners for doing this well. It allocated the budget for health, education and infrastructure, considered important sectors for inclusive growth.
Courts, governance
In strengthening governance, they addressed large-scale corruption by providing technical assistance to the Commission on Audit, the Office of the Ombudsman and Securities and Exchange Commission. She believes this effort has been successful, as the Philippines has been improving in Transparency International’s Corruption Perception Index. It ranked 105 out of the 176 countries surveyed in 2012. In 2013, it jumped to the 94th spot out of 177 countries.
Part of strengthening governance meant ensuring the efficiency of the country’s courts. This led to efforts to automate the courts, decongest them and improve the trial process. This meant streamlining the court hearings, reducing criminal trials from 1,000 to 250 days and civil litigation from 500 to 100 days. This has been noted in the Quezon City court district, the largest in the Philippines.
Steele said they have the cooperation of the Department of Justice and the Supreme Court.
To improve the regulatory quality of the Philippines, they assisted in helping the country improve its trade policy in hopes of bringing in investments from other countries.
They are also in the process of creating a local think tank for energy. They extended a grant to the UP School of Economics for technical support and policy reform assistance in partnership with US universities to come up with an academic program for energy. She hopes this will develop local Philippine economists specializing in energy, a critical sector for the country.
To improve local competitiveness, they have assisted in the development of road maps for 15 high-growth industries. They also have a loan guarantee program for small and medium enterprises, which often have trouble getting financing to expand their businesses because they do not have collateral to present to banks.
Steele said the Philippines is already reaping benefits, from being ranked 85th in the World Economic Forum’s Global Competitiveness Index in 2010 to 52nd in 2014. It was in 144th place in the International Finance Corp.’s Doing Business Report in 2009. Last year, it was ranked 95th. She added that getting credit ratings upgrades from international ratings agencies are also proof that the Philippines is becoming competitive.
To strengthen the country’s human capital, they introduced linkages between the academe and industries to ensure students pick the right courses and get the right training required of the high-growth industries in the country. They are also encouraging more investments in research and innovation.
In expanding infrastructure development, they have helped mobilize $5.8 billion in infrastructure investments such as the Laguna Lakeshore Expressway and projects in power, tourism roads and in water and sanitation. Steele believes the Philippine Government has done a good job in making the necessary policy changes required to address the binding constraints to the country’s growth.