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By Darwin G. Amojelar Reporter
The Asian Development Bank (ADB)
on Thursday said rampant corruption, political instability and poor
revenue collections are the main culprits in the country’s
worsening poverty incidence.
In the report, Philippines:
Critical Development Constraints, the Manila-based lender said the
pace of poverty reduction has been slow, and income inequality
remains stubbornly high in the country.
Data released by the 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.
The ADB said the economy has
fallen behind its neighbors in East and Southeast Asia over the past
five decades.
“While growth has picked up in
recent years, with the economy in 2007 posting its highest growth of
7.3 percent in the last three decades, both public and private
investments 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,” the ADB said.
For growth to make an impact on
poverty, the ADB said the economy must create productive employment
opportunities that benefit and reach all sections of society.
“The government can support its
development agenda through broadening access to education, training
and health services, instituting more effective and better-funded
development programs at local levels, and improving targeted social
protection and disaster relief,” the lender said.
Ifzal Ali, ADB chief economist,
said, “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.”
Removing constraints “would
ensure that the fruits of development are shared by all,” Ali
added.
The 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, poor performance on key
governance aspects, such as in the control of corruption and
political stability, has eroded investor confidence. The report
cites studies suggesting that the Philippines’ ranking in the
control of corruption and maintaining political stability have
worsened.
“Governance concerns underline
other critical constraints,” the ADB said. “For instance,
corruption undermines tax collection, reduced resources for and
quality of infrastructure development. Similarly, the political
instability hinders investment and growth and reduces the tax
base.”
Secondly, the fiscal situation
remains tight even while the government made good progress to reduce
deficits and aims to balance its budget in 2008.
“Much of the reduction in
fiscal deficit has been driven by deep cuts in spending on social
and economic services and sale of government assets,” the ADB
said.
Thirdly, declining public and
private sector investments in infrastructure have led to inadequate
and poor infrastructure and bottlenecks. These have raised the cost
of doing business and eroded the competitiveness and attractiveness
of the country to both foreign and local investors, the lender
explained.
Latest available data shows that
per capita electricity consumption in the Philippines is roughly
one-third that of Thailand and one-fifth that of Malaysia.
Similarly, the Philippine ratio of paved road length per capita is
roughly one-sixth that of Thailand and one fourth of Malaysia.
Poor infrastructure and weak
investor confidence have led to weak flows of foreign direct
investment. From 2002 to 2006, investment flows amounted to about
$1.1 billion, compared with $6.1 billion for Thailand and $3.9
billion for Malaysia.
The lower investment partly
explains the Philippines’ smaller and narrower industrial base,
compared to its neighbors. In 2005, the share of manufacturing in
GDP was about 23.5 percent, compared with 34.8 percent in Thailand
and 30.6 percent in Malaysia.
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