Urbanization key to broadening growth

Increasing urbanization is the way for the Philippines to broaden growth and reduce income inequality, a director of leading lender BDO Unibank said.

BDO independent director Roy Ramos, a veteran analyst and banker who had worked for various international institutions, also argued in favor of the public private partnership (PPP) framework in infrastructure-building in a briefing to advocacy group Shareholders Association of the Philippines last week.

“I wish there will be more PPPs, in other words co-opt the private sector in having a greater share in building infrastructure. It’s nice to leverage the private sector because it spends a lot more capex (capital expenditure),” Ramos said.

“There are some projects that the government is obviously in the best position to do, like roads and dams but there are projects that the private sector can do more efficiently and effectively such as power or airports,” he said.

Recently, the Duterte administration has signaled preference to having infrastructure projects funded by official development assistance or via government-to-government deals instead of bidding them out to the private sector. The much-awaited five airport PPP project has been taken off the table.

One good thing happening in the country is that most of the infrastructure projects planned by the government would benefit areas outside Metro Manila, Ramos said.

BDO was particularly bullish on increasing urbanization across the country, Ramos said, adding this would translate to broader-based growth and lifting income. Urbanization had the effect of creating higher-paying jobs and higher quality infrastructure and thereby making growth more inclusive, he said.

As proof of concept, Ramos noted that the eight most populous cities in the country were growing at a faster pace than the rest of the country. However, he said urbanization was coming from a low base and occurring at a slower pace in this country. The Philippines was only ahead of Vietnam and India in this metric, he said.

“If you think about it, Metro Manila is as prosperous as China. It’s got the same GDP (gross domestic product) per capita income as China. The rest of the Philippines, unfortunately, is as poor as India,” Ramos said.

Citing data as of 2014, Ramos noted that GDP per capita in Metro Manila was P365,000 compared to the P91,000 average in the rest of the country.