The year 2012 was a year when we began to see the fruits of good governance and its impact on the Philippine economy.
At the start of 2012, the platform of good governance was criticized for having delivered a paltry performance the year before, 3.9%. It did not matter that the period coincided with global supply disruptions brought about by the tsunami in Japan, the crisis in MENA and the floods in Thailand; what the critics saw was the very minute contribution of government consumption expenditure to total GDP, a clear indication of governance reforms. As it turned out, the reforms were investments to an improved climate for business and society, as a whole.
The President initiated the moves to promote transparency and accountability by announcing his “Social Contract with the Filipino People” at the start of his term in 2010. This became the basis for the Philippine Development Plan 2011-2016, which translated the Social Contract into tangible policies and programs. The Plan preparation, while spearheaded by the NEDA, involved all agencies of government, the business sector and civil society. The overarching goal articulated in the Plan was to achieve rapid, sustained and inclusive growth anchored on the principles of good governance.
One of the first reforms implemented was intended to expunge what was termed as the “culture of impunity” and this meant going after the “wang-wang”of Philippine society- the tax evaders, smugglers, corrupt officials, usurpers of authority, etc. Bureaucratic reforms to reduce the cost of doing business, such as the procedures for applying for a business permit and registering a business name, are further being addressed to improve the country’s business environment. Strategies to increase participation in the budgetary process were also piloted and will perhaps be expanded in 2013.
Beyond these reforms, the notion of “matuwid na daan” resonated in all agencies of government. As a result, savings were being realized from many quarters of public service provision.
Towards the latter part of 2011 and all through 2012, government has accelerated its disbursement both in MOOE and capital outlay. The former included the government counterpart in administering the conditional cash transfer (CCT) program, whose coverage was increased to some 3 million families. The latter, together with projects under public-private partnership (PPP), was intended to address the neglected state of infrastructure that was eroding the country’s competitiveness.
The business sector, both here and abroad, have likewise appreciated these reforms. As a result, there have been eight positive rating actions earned since the Aquino Administration assumed office, from Fitch, S&P, and Moody’s. We have also moved up in various competitiveness and governance rankings.
Gross domestic product for the first three quarters of 2012 grew by 6.5 percent, and it is highly likely that growth will surpass the targets set by the Development Budget Coordinating Council (DBCC), which was 5-6 percent. This growth occurred while deepening macroeconomic stability and fiscal discipline. Inflation was low and stable, 3.2%; fiscal deficit was kept at about 2%; debt stock to GDP was reduced to about 50%, down from about 74% in 2004. It must also be noted that elsewhere in the world, countries were going through economic crises (US, Japan, Euro Area) or political crises (Egypt, Libya, Syria).
The primary driver of growth on the demand side was household consumption, which grew by 5.7%, although the increase in fixed capital (7.9%) was also substantial. In particular, investments in construction posted a major turnaround, growing by 12.6% in the first three quarters of 2012, from a contraction (-9.4%) the year before. This development is expected to sustain the growth even in the medium term, for instance, public investments were channelled to addressing infrastructure bottlenecks.
The export sector continued to be weighed down by external events. Nevertheless, it increased by 8.6%, contributed largely by exports in services that included the IT-BPO sector. Apart from signs of a recovery, the portfolio of goods and markets has also diversified. This makes the Philippines less vulnerable to shocks coming from a single country or region.
The present challenge is to sustain the growth and make it more inclusive. It has been observed that employment has not responded quite well to the growth. Improvements in the country’s competitiveness are expected to bring in investments, perhaps in the short term; this will then create jobs, which can be expected in the medium term. Public policies and programs will continue to address infrastructure bottlenecks and reduce the cost of doing business to encourage investments. Programs for human capital development will also be in place to ensure that when these investments demand the labour, there will be an appropriate supply. Likewise, social protection and safety nets have been set in place for the marginalized and most vulnerable sectors of society, as well as providing for assistance to victims of disasters, natural or man-made.
One potentially huge source of investments is the remittance from Overseas Filipinos (OFs), which are expected to increase by about 5% for the full year of 2012. In the first nine months of 2012, remittances from OFs have already amounted to US$ 15.6B, much higher than FDI inflows. What is needed is a deliberate program to encourage investments from OFs and their families, effectively involving them in the economic development of the country and create jobs in the process.
There is a lot of scope for public policy and programs to promote inclusive growth. NEDA is in the process of completing its assessment of the first two years of implementation of the PDP wherein the gaps to achieving the Plan targets have already been identified. Going forward, the strategies of government will be deliberate; they will be directed to address the gaps, and they will take stock of what has been done and what can be expected in the future. The principles of good governance will continue to be the anchor on which these strategies will be designed. As before, these strategies will be articulated in a document, the Updated PDP, against which we will commit, once again, our due accountability as an institution.
(COPYRIGHT: Malaya Business Insight)