Reducing foreign investment restrictions as well as increasing competition in the power, telco and transport sectors would allow the Philippines to achieve higher productivity growth and, later on, a poverty-free society by 2040, the World Bank said Monday.
A World Bank report titled “Growth and Productivity in the Philippines: Winning the Future” stated that “the more efficiently the country can use its resources (human capital, natural resources, machines, technology, knowledge), the better chances it will have to generate high-paying jobs and reduce poverty.”
“Sustaining higher productivity growth will require removing constraints affecting the country’s entrepreneurs, potential investors, farmers, and other producers. Among these constraints are low domestic and foreign competition, regulations that are stifling entrepreneurship and small and medium-enterprises, and restrictions on foreign participation in the economy,” the World Bank said.
The World Bank said productivity growth would be enhanced if the government could allow foreign enterprises to compete in currently restricted investment sectors by reducing the equity caps; reduce trade costs through improved port and logistics infrastructures, and further easing the way of doing business by streamlining procedures when starting a new enterprise and paying taxes.
It also urged the Philippine government to make regular job contracts “more flexible,” while putting in place more balanced regulations between employers and employees.
“By creating an equal playing field and simplifying business regulations, firms will be encouraged to enter the market and invest, grow, and innovate, leading to higher labor productivity. Competition, with a flexible labor market, allows higher productivity and raises real incomes of workers, said Rong Qian, World Bank senior economist and lead author of the report.
“The Philippines’ ability to sustain its current high growth rate will depend primarily on how it can accelerate investment in improving its physical infrastructure, and how it can make better use of capital, labor, and technology to increase productivity,” World Bank country director for Brunei, Malaysia, Philippines and Thailand Mara K. Warwick said.