IMF says gov’t on right track

THE INTERNATIONAL Monetary Fund (IMF) has cited several reforms implemented by the Aquino administration, saying these could boost investments which are key to sustaining the growth momentum of the economy.

“We are absolutely happy with the progress of the Philippines so far. The government is making growth more sustainable, improving the business climate and increasing labor productivity,” IMF Asia-Pacific Director Anoop Singh said in an interview in Makati City yesterday.

He cited the Philippines’ healthy economic growth of 6.6% in 2012, beating the IMF forecast of 6.5% and the government’s target of 5-6%.

To stay on this growth track, however, investments must be increased — particularly foreign direct investments (FDI), Mr. Singh said.

This goal takes on even more importance since the Philippines is attracting significant capital flows, he explained.

The country stands to gain more when these flows enter as FDI, not short-term, volatile portfolio investments.

Investment rates in the Philippines lag behind those in Southeast Asia. Last year, investments made up 19.1% of the economy, easily dwarfed by the 24% in Malaysia, 27% in Thailand and 33% in Indonesia.

The government must improve public spending further , Mr. Singh said.

It can and also raise revenues, not necessarily by hiking taxes but also by streamlining fiscal incentives, he added. “In this case, the government needs to remove fiscal incentives more since they restrict the tax base.”

The rationalization of the fiscal incentives bill is a priority measure of the Aquino administration. Congress failed to pass it last year due to a stalemate between the Trade and Finance departments.

Moreover, the government must open up the economy to attract more FDI.

Mr. Singh said the move to review the Foreign Investment Negative List (FINL) was already a step in the right direction, adding, “We’re not asking for a change in the Constitution.”

The Finance and Trade departments, along with the National Economic and Development Authority, began the review of the FINL last month. The list identifies investment areas and activities which are reserved for Philippine nationals.

Lastly, the government must spend on education and health — areas which are proven to improve the productivity of labor. Social spending, in turn, can make economic growth more inclusive and reduce inequality.

“This is why the conditional cash transfer (CCT) program is important, and it can reach as much as four million families a year,” Mr. Singh said.

The CCT provides allowances to poor households, provided that the mothers avail of pre-natal and other maternal care check-ups and their children are immunized and attend 85% of their classes. — Diane Claire J. Jiao
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