World Bank says Phl human capital investments to counter overheating
The Philippines needs more investments in infrastructure and human capital, particularly upgrading the skill sets of workers for higher-paying jobs to be able to counter risks of an overheating economy, the World Bank Group said.
In a press conference Monday, World Bank lead economist Birgit Hansl, who is also program leader for equitable growth, finance, and institutions for Brunei, Malaysia, Philippines, and Thailand, said the Philippine economy is currently in a state where it wants to grow more.
Hansl said the Philippines is at risk of overheating, which happens when the production capacity of a company cannot keep up with the pace of the growth of demand.
“Even if you’d like to produce more, you cannot at this point, without investing first into new productive capacity or into educating more people to have higher skill sets for higher labor jobs,” Hansl said.
She underscored the need to increase productive capacity to attract investors from outside and inside to expand capacity in manufacturing.
In addition, the Philippines must also invest heavily in human capital or to allow people who are in lower-paying jobs to move towards higher productive jobs that are in demand.
Mara Warwick, World Bank country director for Brunei, Malaysia, Philippines, and Thailand, said the main challenge facing the Philippines today is not unemployment, but the poor quality of jobs in the labor market.
“High-quality jobs and faster growth of real wages are the missing links to higher shared prosperity in the Philippines,”Warwick said.
While unemployment in the country has reached historic low rates, the World Bank emphasized that underemployment remains high, near its 1820 percent decade-long average.
“At the same time, mean wages remained largely stagnant,” it added.
Meanwhile, the World Bank said the government needs to affirm its commitment to the promotion of competition, secure property rights, less regulatory complexities, and an improved investment climate.
This can be done by prioritizing investment in both physical infrastructure and human capital, such as in education, skills, and health, as this will create better employment opportunities, especially among the poor.
Last week, the World Bank reported it expects the Philippine economy to grow by 6.7 percent in 2018 and 2019, before moderating to 6.6 percent in 2020.
Despite the positive growth outlook, Hansl said the Philippines is currently facing several domestic risks such as increasing inflation and high fiscal deficit.
“Fiscal and monetary management has to be done in a quite careful way to support growth, but also at the same time, gets the right incentives to have these investments coming through,” Hansl said.
In its Philippines Economic Update(PEU), the World Bank said the implementation of the public infrastructure program is vital to the country’s growth outlook, as private investment is expected to weaken.
“Prudent fiscal management and the implementation of the government’s tax reform agenda could help secure the country’s fiscal sustainability,” the report said.
Hansl said the passage of the comprehensive tax reform package two could help the country attract more investments as it seeks to create a level playing field for investors and companies in the Philippines.
The said package will lower corporate income taxes and put it at par with those of other Asean countries, while rationalizing the tax incentive regime.