The Philippines should strengthen its macroeconomic fundamentals in the key areas of banking and agriculture and take advantage of its positive demographic structure to be able to compete with larger markets in the upcoming Association of Southeast Asian Nations (Asean) Economic Integration in 2015, the country’s top government officials said.
“Our own goal has always been to keep our own house in order and strengthen it so that when shocks do occur, we have buffers to shield us. Recently, our efforts to keep our house in order have gained more urgency in light of our preparations for Asean economic and financial integration,” said Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. during his keynote speech at the Financial Times-First Metro Investment Summit held on Monday.
Tetangco said that the central bank recognizes the potential of integration but also remains cognizant of the challenges that the initiative may bring, such as in implementing the Asean Banking Integration Framework or ABIF.
He said that the BSP has prepared the groundwork by creating a stable macroeconomic environment and putting in place a sound regulatory framework consistent with the global reform agenda.
Tetangco said the central bank has proposed amendments to the law liberalizing the entry of foreign banks into the country so that foreign banks can establish their own branches or subsidiaries here in the Philippines.
The BSP governor said that the central bank has also started discussions with various banking organizations, which should provide further clarity and level expectations among their member-banks and give them the chance to craft their respective forward-looking competition strategy.
“The ongoing rebalancing of growth across the globe as well as the challenge of preparing for greater integration with our Asean neighborhood will require continued vigilance on the part of the BSP and more active involvement from our banks,” he said.
For its part, the National Economic and Development Authority (NEDA) underscored the importance of agricultural productivity in strengthening the country’s competitiveness ahead of the Asean integration.
“Agriculture is so crucial to our social development programs because a large proportion of our labor force—about one-third of our labor force—depends on agriculture,” NEDA Director General Arsenio Balisacan noted during a panel discussion.
He said that although agriculture is a small part of the Philippine economy, improving agricultural productivity remains an important factor for growth.
“Improvements in the income of people in the agriculture sector would help a lot in reducing poverty and even accelerating the growth process, especially since agriculture is interlinked with our industry and services sectors,” Balisacan said.
“However, we are looking at the entire economy. We would want to have improved productivity in all sectors but the importance of agriculture is even more recognized because of the dependence of more people on that sector,” he added.
Meanwhile, Finance Secretary Cesar Purisima highlighted the Philippines’ positive demographic structure as an advantage in the upcoming integration.
“The Philippines is poised to be the second largest country in terms of population in Asean. By next year more than 50 percent of the country’s population will be in working age,” he said.
Purisima said that the demographic profile of the country is important as the youth is considered to be the prime engine for consumption.
“The challenge for the Philippines is to make sure that we educate and invest in our people through increased investments in education and health care. We need to continue what we have been doing in the past years to make sure that we will be able to realize the potential of the young population,” he said. MAYVELIN U. CARABALLO