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By Darwin G. Amojelar, Reporter
THE Asian Development Bank said the
Philippines’ tight fiscal situation, weak infrastructure,
investors’ lack of confidence, and the scarcity of productive
employment opportunities are the critical constraints to growth and
poverty reduction in the next five to eight years.
In its report, the Manila-based lender said many
of these critical constraints are interlinked.
The ADB said removing these three constraints
such as the tight fiscal space, inadequate infrastructure, and weak
investor confidence will result in increased private investments
from domestic and foreign sources.
To ensure that growth can be sustained at a high
level similar to that achieved by other Southeast and East Asian
economies in recent decades, the government will have to address
market failures to encourage investments in a diversified
manufacturing sector and exports, and in the upgrade of the level of
technology.
The country’s gross domestic product
(GDP) doubled between 1986 and 2006—a growth rate of about 3.5
percent each year. However, the multilateral lender said this pace
of growth leaves much to be desired when compared with that of many
of the Philippines’ East and Southeast Asian neighbors. Last year,
growth picked up to 7.3 percent, a 31-year record for the country,
but expansion is seen to taper off this year due to a slowdown in
the Philippines’ biggest export market, the US.
The ADB said sustained and high growth,
resulting from the removal of the abovementioned critical
constraints, will create more productive employment opportunities.
This is essential because insufficient employment is the most
critical constraint to poverty reduction in the Philippines, it
said.
The ADB, however, said that the expansion in
employment opportunities may not lead to significant poverty
reduction unless inequalities in access to development opportunities
are reduced and removed by instituting good governance and better
policies.
The lender also proposed the following policy
priorities to address the constraints: the expansion of the
government’s fiscal space by instituting efficient tax collection
machinery, streamlining of the tax incentive program, strengthening
expenditure management, rationalizing the rate structure of the tax
system, and cutting losses of and subsidies to government owned or
controlled corporations.
The ADB also said the country should accelerate
infrastructure development, catching up with the Electric Power
Industry Restructuring Act (EPIRA), upgrade and maintain roads and
transport systems, expanding regional and local infrastructure and
minimizing political instability.
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