Page last updated at 01:07 Asia/Manila, Saturday, 03 October 2015 PH
As reported in the local press, last May 20, 2015 hundreds of top executives from both the private and public sectors met at the Makati Shangri La primarily to listen to Harvard political scientist James Robinson present the major findings of his best selling book (with co-author Daron Acemuglo) entitled Why Nations Fail. Although I have already written about it several times in my columns, there was so much substance in the presentations of the other speakers that I would like to summarize their views for my readers. Although I myself brought up some of the failures and weaknesses of the present Administration, especially in the implementation of major infrastructure projects, I must say that comments I received from those who attended the Investment Summit, both Filipinos and foreign visitors, confirmed my opinion that the Philippines cannot but succeed in improving the economic welfare its citizens in the years ahead. Thanks to the organizers of the Summit, Financial Times and the First Metro Investment Corporation, I got the impression during the open forum that a very optimistic mood prevailed.
The main reason for this optimistic assessment really flows from the very paradigm of Why Nations Fail. According to the authors, the secret to economic success is not primarily found in geography, culture, natural endowment of history. The key to success is the creation of inclusive political and economic institutions by competent and honest leaders who are committed to the common good. In the East Asian region, prime examples are Singapore, South Korea, Hong Kong and Taiwan. Listening to the top officials of the Bangko Sentral Ng Pilipinas (BSP), one of the most outstanding institutional successes of the last twenty years is the creation of arguably the most efficient and effective Central Bank in East Asia. Thanks to successive Central Bank governors over the last two decades, the BSP has been completely depoliticized and professionalized. Together with parallel reforms in the Department of Finance, we can expect continuous macroeconomic stability under future Administrations. I see no reason why we cannot keep the inflation rate at an average of 2 to 3 per cent for many years to come and the exchange rate stabilized at 44 to 46 pesos to a US dollar.
Then there are the market-oriented institutions. As can be gleaned from the improved ranking of the Philippines in global competitiveness according to the World Economic Forum, there are enough competitive forces in major industries to bring the best out of some of the Philippine economic sectors such as BPO/KPO, tourism, food and beverage, construction, real estate and housing, and entertainment. Although there can still be significant improvements in the regulation of oligopolies, there have been sufficient deregulation and privatization in such strategic sectors as energy, transport, telecommunication and water that the Philippines can sustain the 6 to 7 percent GDP growth it is now experiencing for the next decade or so. In fact, I expressed the opinion that the growth can accelerate to the range of 8 to 10 percent if the next Administration can implement the close to 50 projects listed under the Public-Private Partnership program announced by the present Government over the last three years. These projects have a total cost of close to one trillion pesos, which can significantly pump prime the economy. In fact, the existing serious weakness of inefficient infrastructures can be converted by the next Administration into an opportunity of aggressively spending on public works without the danger of hyperinflation.
The most important contribution of the present Administration to sustainable economic growth can be found in improved governance, the more determined campaign against corruption. A Chief Justice has been impeached for his failure to file a truthful Statement of Assets, Liabilities and Net Worth (SALN). Corruption among top government officials is being exposed by a stricter implementation of the Anti-Money Laundering Act (AMLA). The notorious pork barrel system has been abolished, together with the disbursement acceleration program of the President. More than three thousand of the top business corporations have signed an integrity pledge committing to refrain from any corrupt practice such as bribery and tax evasion. Nongovernmental organizations such as the Makati Business Club, the Management Association of the Philippines, the Institute for Solidarity Asia, the Asian Institute of Management, and the Institute for Corporate Directors are very active spreading the principles and practices of good governance in both the private and public sectors. The millennials are sparing no effort in using social networks to monitor the corrupt practices of public figures. All these institutions will severely limit the ability of future leaders to perpetuate actions contrary to the common good.
The biggest challenge to the next Administration is to ensure that growth will trickle down to the poorest of the poor. This will not happen through market forces alone. There will have to be decisive intervention from the State in building farm to market roads, irrigation systems, post-harvest facilities and other infrastructures and support services in the countryside to enable the poor farmers and other rural dwellers to earn a decent living. The State also has to spend more in improving the quality of primary and secondary education in the rural areas; build more rural health facilities, especially maternity clinics in these areas; and make potable water accessible in the countryside. It has to be stressed again and again that Philippine poverty is fundamentally a rural phenomenon. Seventy five per cent of those Filipinos who are below the poverty line are the in the rural areas. A more realistic approach to agrarian reform must be crafted by the next Administration. There is reason to be optimistic that the Philippines will succeed in the next decade or so to attain sustainable and inclusive growth. Having attained a critical mass of inclusive political and economic institutions, its primary assets of a growing, young and English-speaking population; its very strategic location in East Asia and its rich endowment of natural resources can be made more productive for the benefit of each Filipino. For comments, my email address is email@example.com.