By Bernama
Manila : The Philippines must raise revenues, improve infrastructure, strengthen governance to build investor confidence and expand its industrial base to increase growth and reduce poverty, China’s Xinhua news agency quoted the Asian Development Bank (ADB) as saying here on Thursday.
The economy in the Philippines has fallen behind its neighbours in East and Southeast Asia over the past five decades, said the bank in a press release, adding that the pace of poverty reduction there has been slow and income inequality remains stubbornly high.
The latest data released by the Philippine government showed that 26.9 percent of families in 2006 were below the official poverty threshold, up from 24.4 percent in 2003. In 2006, the Gini coefficient of per capita income, a key measure of income inequality, was slightly above 0.45, the highest among Southeast Asian economies.
While growth has picked up in recent years, with the Philippine economy in 2007 posting its highest growth of 7.3 percent in the last three decades, both public and private investment remain sluggish and their share in gross domestic product has continued to decline, raising the question of whether the current economic momentum can be sustained, said the multilateral development bank.
ADB identified a number of critical constraints to economic growth and the fight against poverty in the next five to eight years for the Philippines.
Firstly, the fiscal situation remains tight despite the government making good progress to reduce deficits and aims to balance its budget in 2008, according to ADB.
Secondly, declining public and private sector investments in infrastructure have led to inadequate and poor infrastructure and bottlenecks, which have raised the cost of doing business and eroded the competitiveness and attractiveness of the country to both foreign and local investors.
Thirdly, poor performance on key governance aspects, in particular, control of corruption and political stability, has eroded investor confidence.
“Targeting and removal of the most critical constraints will lead to the highest returns for the country. It will spur investment, which in turn will lead to sustained and high growth and create more productive employment opportunities,” says Ifzal Ali, Chief Economist of ADB.
“This would ensure that the fruits of development are shared by all,” he added.