PLANNED investment in infrastructure could help the Philippine economy accelerate growth to 6.2 percent this year, but only if the problem of ‘brain drain’ is seriously addressed, a new economic review said.
In the latest edition of “Economic Insight: South East Asia,” UK-based Institute of Chartered Accountants in England and Wales (ICAEW) said strong public finances will allow the Philippines to pursue more infrastructure projects in 2015.
According to the study, strong public finances have enabled the Philippines to place a new focus on infrastructure investment in 2015.
“The Philippines public-private partnership (PPP) center has approved construction projects worth $24.5 billion, which could contribute greatly to infrastructure improvements,” it said.
It is uncertain, however, whether the entire $24.5 billion would be applied in 2015.
ICAEW’s latest gross domestic product (GDP) estimate for the Philippines for 2015 is higher than the 6.1 percent growth of the economy last year, but still lower than the 7 percent to 8 percent target of the government this year.
The study stressed that the brain drain issue is depriving the labor pool of much of its greatest talent, but this could be reversed with greater internationalization within industry sectors.
“This has been a problem for a while now, with the country having lost an estimated 10 percent of its population to work abroad, including many highly qualified professionals,” Charles Davis, ICAEW Economic Advisor and Centre for Economics and Business Research (CEBR) director, said.
Davis noted that while the Philippine economy is partly compensated through remittances, most of the productivity gains accrue to the developed economies in which these emigrants live.
The study recommends that while the Philippines can’t compete with higher wages in Singapore or the United States, it could follow in the footsteps of other Asian countries that have successfully reversed similar brain drain challenges and seen emigrants returning in large numbers.
“As we have seen, in China and India for example, emigrants are willing to return to their home countries despite even wage cuts, so long as they are confident their sector of expertise exists [in the local labor market],” Mark Billington, Regional Director, ICAEW South East Asia, said.
One key strategy will be to make sure that the Philippines’ high-tech industrial centers are integrated into relevant international networks; this means that people can return to their home nation without fearing that their career progression will suffer, the study said.
Lastly, the ICAEW report pointed out that good infrastructure is also going to be vital.
“It allows clusters of new industries to develop, which is crucial to maximize the potential of sectors of the workforce that are already highly-educated and qualified, and encourages entrepreneurship. Other incentives, such as providing grants for the right new businesses, will also help,” it concluded.
The “Economic Insight: South East Asia” study is produced by Cebr, ICAEW’s partner and economic forecaster. Commissioned by ICAEW, the report provides its 144,000 members with a current snapshot of the region’s economic performance.
The report undertakes a quarterly review of Southeast Asian economies with a focus on Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.