Phl urged to address gaps in infra, education

The Philippines will have to address gaps in infrastructure and education to achieve a high level of economic growth, according to global consultancy firm Bain and Co.

In an interview, Bain and Co. Southeast Asia founding partner Charles Ormiston said addressing issues in infrastructure and education would enable the country to achieve high growth.

A report by Bain and Co. and Monk’s Hill Ventures’ Angsana Council released last month showed the Philippines is projected to grow by four to five percent annually over the next 10 years, making it among the top three performers in Southeast Asia.

Vietnam is expected to lead the charge with a projected annual growth of five to seven percent, while Indonesia is expected to grow by four to five percent annually in the next 10 years.

The Philippine government is aiming to achieve a 6.5 to 7.5 percent gross domestic product (GDP) growth for this year.

From January to September, the economy grew by 7.7 percent.

For next year until 2028, the government has set a 6.5 to eight percent growth target.

Ormiston said the Philippines has under-invested in infrastructure in the past, with the report showing the country’s average public infrastructure investment as a percentage of GDP at two percent from 1960 to 1979, three percent from 1980 to 1999, and two percent from 2000 to 2019.

“So there is no doubt that if you can increase this infrastructure spend, it will be an enabler of high growth. But you still have this issue for the last 30 years, you have underinvested. So the bigger impact of this infrastructure spend are likely to take place say, three to five years after you begin initiating the spend,” he said.

He said education is another issue for the Philippines, with the country being the lowest performer in the Program for International Student Assessment, which measures 15-year-olds’ ability to use their reading, mathematics and science knowledge and skills to meet real-life challenges.

“This will take a fairly long time to address…You can’t just fix at the primary level and then wait for 30 years for it to translate to the economy. There needs to be a concerted effort to address locational training and basic skills,” he said, noting the government cannot do all the work alone, and the private sector will also have a role to play.

“It needs to be a cultural commitment to education and not just waiting for the government to build schools and provide teachers,” he said.

As the country’s agriculture sector has historically had low growth, he also said there is a need to improve productivity in agriculture and to move people currently working in the sector towards higher value-added services and manufacturing.

While the recently enacted reforms that seek to ease foreign ownership restrictions in certain sectors such as telecommunications, transport and retail, are important in attracting foreign investors, he said the government would still have to address other factors affecting investment decisions, especially as the country is competing with its Southeast Asian neighbors that have well-honed programs for attracting foreign investments.

Among the recent reforms aimed at encouraging foreign investments to the Philippines are the passage into law of the amendments to the Public Service Act, Foreign Investments Act and Retail Trade Liberalization Act.

“What the government needs to do is better understand how these (investment) decisions are made and they need to address all of the factors, regulation, stability to bring in duty-free key supplies, as well as spare parts or capital equipment, local financing is available or support for trained workers,” Ormiston said.

While he expects few investments to take place right away as a result of the Regional Comprehensive Economic Partnership (RCEP) agreement as it will take time for provisions of the mega trade deal to be fully executed, he said it would be a bad signal for the Philippines to opt out of the deal.

“By not signing up, you are sending the signal that you are not as committed to open trade as some of the other countries and so, it is dangerous to be outside the club even if that club isn’t necessarily the best club in the region,” he said.

The RCEP agreement was signed by members of the Association of Southeast Asian Nations and trade partners China, Japan, South Korea, Australia and New Zealand,

While the Philippines is among the countries that signed the RCEP, it has yet to get the Senate concurrence needed for the agreement to take effect.

He said if the Marcos administration does the right things over the next five years, the country may see high growth rates in the next decade.

“It will take that kind of forward looking administration to really achieve the benefits,” he said.