‘Wider infrastructure development crucial to PHL growth’

Wider infrastructure development is crucial for the Philippines to push a faster and more robust economic growth in the next three years, research from the Standard Chartered Bank showed on Monday.

The bank revised its gross domestic product (GDP) growth forecast for the country to 6.9 percent this year, from its initial outlook of 5.8 percent, stemming from an expected boom of investments after the completion of infrastructure development projects. Growth forecast for 2014 and 2015 were also upgraded from an expectation of 6.1-percent GDP growth in 2014 now to 6.3 percent. For 2015, growth is seen to spike at 7 percent, about 2 points up from its initial forecast of 5.5 percent.

“Both local and international investors agree that infrastructure needs to be developed, even though many acknowledge that progress is under way. The Philippines will, therefore, benefit from public-private partnership [PPP]-led infrastructure development, along with smoother process flows in corporate governance,” Standard Chartered said.

While the bank acknowledged the Aquino administration’s pledge for better transport, power and tourism sectors through the PPP projects, they also said the Philippines has yet to “experience a spike in PPP-driven construction.”

The bank also measured the progress of PPP projects and reported that a total of three PPP projects are in the construction stage—two road-construction projects and one on school infrastructure.

“However, this is only the tip of the iceberg—as many as 20 projects are still in the planning and bidding phases. Based on current progress, we believe the remaining seven of the eight projects that were rolled out last year and are currently in the ‘live bidding’ stage could move to the finalization and construction phases around end-2013 or mid-2014; one has already been awarded to a bidder,” the bank said.

Research also showed that the Philippines is “yet to convince foreign investors to invest decisively in the country” as it is still lagging behind its neighbors in terms of attracting foreign direct investments (FDI).

According to the report, the Philippines has several advantages that add to the attractiveness of the Philippines as investment destination, including a relatively young and sizable English-speaking population, its recent upgrade to investment grade from Fitch and Standard & Poor’s, its contribution to business-process outsourcing services export and tourism.

However, the research report mentioned that the Philippines is still perceived as a difficult place to do business.

“In the World Bank’s Ease of Doing Business Index, the Philippines ranked particularly low, finishing at the bottom of the Asean-6. The report cited problems with starting a business, resolving insolvencies and paying taxes, and the lack of infrastructure development,” the report said.

Standard Chartered also said that while the infrastructure boom is crucial to boost the growth, stable domestic consumption, net exports and remittance inflows are strong fundamentals that will significantly support the expected growth in GDP.

“We expect the Philippines to maintain strong economic growth and manageable inflation over the medium term. In our core scenario, the economy is moving toward balanced growth, supported by domestic consumption and investment,” the bank said.

“Overall, we expect the Philippines to register above-trend growth in the next three years, and believe this period presents a golden opportunity for the country to leverage its investment potential and accelerate its growth trajectory,” the report added. –Bianca Cuaresma, Interaksyon