PH needs to triple average Pinoy income – WB

The Philippines’ needs to triple the average annual productivity income of Filipinos in the next two decades to achieve the long-term vision for the country, the World Bank (WB) said yesterday.

In a briefing, Rong Qian, World Bank senior economist, said the country’s per capita gross domestic product (GDP) should grow by at least 6.5 percent until 2040 to meet the government’s Philippine Development Plan (PDP) or the so-called “AmBisyon”.

Between 2000 and 2017, the Philippines per capita GDP growth averaged 5.3 percent.

To achieve the desired expansion pace, Qian said the Philippines needs to accelerate physical investments, like roads, bridges and airports, noting the government has invested “little in physical capital compared to regional peers over the last two decades.”

“We need to develop the country’s infrastructure,” Qian said. “There’s an opportunity to accelerate growth by investing in infrastructure.”

Likewise, the ADB economist said the country needs to sustain high productivity growth, which has been rapidly increasing since 2000, by efficiently using its resources to produce goods and services.

“Going forward, it will be crucial to sustain this high productivity growth to reach the income target of Ambisyon. But remember, this is growth rate, it means the country needs to continuously improve efficiency on how to do things,” Qian said.

According to the World Bank, the Philippines’ present per capita GDP is around $3,000, which already doubled in the past 17 years. However, the lender noted that the country’s poverty only declined by 10 percent in the same period, slower compared with Vietnam’s 60 percent. Output per worker increased more than 50 percent over this period. But real wage grew zero, which means the workers have not benefited from the productivity growth,” Qian said. She attributed the zero wage growth on “weak market competition” or unequal playing field for all in the Philippines. “We propose to increase competition in selected sectors that have large effect to the rest of the economy such as telecommunications, electricity, and transport sectors, so we can lower the cost of these services,” Qian said. She also recommended that the government should work on improving the ease of doing business allowing companies to function efficiently, and spend less time in complying paperworks.

“To improve foreign competition and get more foreign investments, [the Philippines needs to reduce] restrictions on foreign investors (e.g., allow foreign competition in sectors and reduce equity limits), which specifically tackle barriers to foreign investors,” Qian said.

The World Bank economist also said that the government should lower nontariff barriers as it has been one of the contributing factors to lower trade.

“To make labor market less rigid, we propose to reduce costs and simplify procedures for hiring and firing workers. Make regular employment contracts more flexible so more term hiring would be encouraged and firms and workers are encouraged to improve and become more productive,” she said.

The Duterte administration is targeting an economic growth rate of 7.0 percent to 8.0 percent until 2022.

But Qian said that high GDP is not enough, noting there are “more could be done to make growth more inclusive.”