China’s economic model offers lessons — IMF exec

SINGAPORE — China may be slowing but its investment-led economic strategy still serves as a good model for countries such as the Philippines that want to boost growth and pull more people out of poverty, an International Monetary Fund (IMF) official said.

“China’s economic model is not very different from that of Japan and Korea; it’s investment/export-led,” said Lee Il Houng, the IMF senior resident representative in China, at the sidelines of a seminar the Fund organized late last week in Singapore.

“China has been very successful and there is something to learn from its experience. The Philippines could beef up investments. That would help a lot in bringing up growth,” added Mr. Lee, who once served as IMF’s mission head to the Philippines before he was assigned to China.

The Philippines, once the most promising economy in Asia, has been stuck in a low-growth rut for decades that has hobbled it from pulling millions of Filipinos out of poverty.

China, in contrast, has vigorously pursued an investment- and export-led strategy since opening up its economy in the late 1970s. Notching double-digit gross domestic product (GDP) growth year after year, it has become the world’s second largest economy and has graduated many of its people from poor to middle-income status.

While its growth has slowed recently, Mr. Lee pointed out China’s economy remained “vibrant.”

The Philippines needs to hit — and sustain — at least a 7% GDP expansion to be able to make a dent on poverty but investments, which are needed to boost growth, have been low because government finances have been constrained and foreign investors have chosen to go elsewhere such as China, Vietnam, and lately, Indonesia.

“I think what the Philippines needs, and I am speaking from memory, is it needs to have a robust fiscal framework. But I think it is addressing this right now,” said Mr. Lee, whose assignment as mission head to the Philippines lasted until 2010.

“But more important going forward, it needs to beef up investments. It needs to provide the necessary infrastructure and a stable regulatory environment for investors, both local and foreign, to invest in the Philippines.”

Mr. Lee placed emphasis on the consistency of government rules, stressing investors need assurance these will not be changed after they have committed their projects in the country.

The IMF official said the fact the country had fallen behind economically was regrettable given its “great” labor force. He added that “civil servants are of a very high quality as well.”

Central bank Deputy Governor Diwa C. Guinigundo pointed out the Philippines was following an investment-led tack via public-private partnerships (PPP).

“The Philippines is actually following an investment-led growth, supported by robust consumption on account of young, economically active population,” he said in a text message yesterday.

Mr. Guinigundo also noted that the government was working on making growth inclusive, adding the central bank was helping through microfinance, credit surety, consumer protection and financial learning. –JUDY T. GULANE, Sub-Editor, Businessworld