World Bank says Phl hu­man cap­i­tal in­vest­ments to counter overheating

The Philippine Star - - BUSINESS - CATHER­INE TALAV­ERA

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.

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