MANILA, Philippines—In addressing the recent Philippine Development Forum (PDF), the President declared that what we need is to invest, invest and invest.

Asian Development Bank (ADB) data show that the total capital formation (i.e., investment) in the Philippines has been stagnant since 2002, with annual investment growth rate averaging zero in 2002-2006. In contrast, our Asean neighbors were averaging annual investment growth rates of 3 to 20 percent.

In other words, our neighbors have been steadily building up the capacity for longer-term accelerated growth in their economies, while we have not. Our reported 7.3-percent GDP growth last year may have been the fastest in the region, but the above tells us that the stage is being set for us to lag behind our neighbors in the years ahead in terms of production growth.

Focusing investments

Not surprisingly, job creation has remained relatively low in the face of supposedly rapid growth, with 2.7 million unemployed Filipinos as of January 2008. Of these, half are between ages 15 and 24 years, and 62 percent had attained no more than a high school education or less. High unemployment, in turn, translates to high rates of poverty, which recent government data report to have worsened since 2003.

Our efforts at raising investment and job creation in the near term must, therefore, focus prominently on industries that could readily employ large numbers of young and relatively undereducated workers. And because 70 percent of the Philippine poor live in the countryside, logical targets would be agriculture, agri-business and rural nonfarm enterprises.

Also, eco-tourism holds much promise, especially with the droves of tourists now coming out of the rapidly growing economies of China and India—not to mention the wide scope for growth in domestic tourism. With our superior medical and health practitioners who are in great demand overseas, our tourism thrust now also promotes the country as a center for health and wellness. Apart from agribusiness and tourism, two other priority investment areas now being targeted by government are mining and information and communication technology (ICT).

Broad thrusts

In pursuit of these four identified priority investment areas, strategic thrusts identified in the PDF included the following:

Address policies that unduly restrict competition.

Investments in agri-business, tourism and other promising enterprises have been impeded by inconsistent policies and regulatory restrictions that serve limited vested interests at the expense of potentially wider benefits. Specific measures include a “pocket open skies” policy for secondary airports (e.g., Clark and Subic), open access in power distribution and promulgating a comprehensive competition policy.

Streamline government processes for opening and closing a business.

Also needed are various government process improvements at both national and local levels that would streamline excessive business regulations and procedural requirements, and reduce the time and cost required to start, operate and close a business. These would facilitate business transactions and reduce the cost of doing business for both domestic and foreign businesses, large and small alike.

Speed up completion of the Comprehensive Agrarian Reform Program.

Studies show that farm investments rise significantly once agricultural lands are placed under agrarian reform. They also show that because of the uncertainty they face, CARP-pending landowners (i.e., those whose CARP-eligible lands are still awaiting CARP implementation) invest significantly less than landowners who have already complied. Such uncertainty must, therefore, be settled as quickly as possible. CARP needs to be extended beyond 2008, but must also be sped up much faster than ever before.

Strengthen land administration and land use policy.

Unregulated and illegal land grabbing has had large environmental, social and political costs, and the resulting lack of security in land tenure has hampered investments in the land. The country’s land management system needs urgent overhaul to streamline processes for registration, transfer of titles, appraisal, taxation and adjudication. In this regard, passage of the Land Administration Reform Act and other related bills must be vigorously pursued, along with the long-pending National Land Use Act.

Develop innovative credit delivery mechanisms for farmers and SMEs.

We need to develop creative credit instruments responsive to the needs of farmers and small and medium enterprises (SMEs), the two sectors traditionally starved of financing. At the same time, there is need to strengthen the organizational abilities of farmers and SMEs to access credit. The policy and institutional environment needs to be made conducive for financing institutions to be responsive to their needs.

The President was correct to say that we need to invest, invest and invest. With the above, the PDF is telling her in turn that much of it ultimately hinges on what she and her government does now and in the years ahead.

Comments are welcome at chabito@ateneo.edu.

• Business Briefs
• Economists expect more job losses in US
• Wall Street hopes for quick recovery

• Problems in search of marketing solutions
• Code of Corporate Governance
• Ship lifting
• Needless debate on recession
• Iran 2009 - What it portends for RP 2010?
• The Cost Question
• Geithner disappoints