Sustainability of reforms after 2016 worries S&P

The Philippine economy may be one of the world’s investment darlings for now, but this optimism may be short-lived amid concerns over the government’s ability to sustain reforms after President Aquino steps down in 2016.

Standard & Poor’s said in a recent report that the change in presidency in 2016 posed the risk that the current policy-making environment and reform processes might be derailed.

“The strength of Filipino democracy ensures a regular succession of elected leaders,” S&P said.

The burden of instituting reforms in government rested almost solely on the shoulders of the country’s chief executive, S&P said in a 17-page report released last week.

The firm described the country’s legislature as composed of “weak political parties organized more along lines of patronage than ideology.” The global credit watcher said this put greater emphasis on the President’s ability to “provide leadership in implementing economic reforms, compared with many other countries.”

The Aquino administration needed to persist with infrastructure spending and microeconomic and administrative reforms to improve the local investment environment and to cement various economic gains, S&P said.

It also emphasized the importance of reducing corruption and the further liberalization of domestic markets.

Based on its own analysis, S&P said it was hopeful that current reforms in the government, particularly in curbing corruption, would not likely be reversed regardless of who would succeed President Aquino.

“However, sustaining and enhancing the reform agenda will depend on the future president’s inclinations and on the amount of political capital he will bring to the office,” S&P said.

For now, S&P said the Aquino administration should take advantage of its control over both houses of Congress, which it won during elections last May, to push for key reforms that would ensure the sustainability of the country’s economic prospects.

Among the measures that should be on Malacañang’s list of priorities are amendments to the Build-Operate-Transfer (BOT) law to speed up the state’s procurement process, the rationalization of fiscal incentives and the removal of foreign restrictions on certain industries.

“The President is… likely to expend political capital to push through these initiatives… much as he did with other controversial laws in 2012,” S&P said. These controversial measures included the passage of the Reproductive Health Law and the increase in “sin” taxes.