Philippines must overcome key constraints to lift growth, reduce poverty - ADB

from Forbes

MUMBAI (Thomson Financial) - The Asian Development Bank (ADB) said the Philippines must raise revenues, improve infrastructure, strengthen governance to build investor confidence, expand its industrial base and improve access to employment and development opportunities to increase growth and reduce poverty.

An ADB report identified several critical constraints to economic growth and the fight against poverty in the next 5-8 years for the Philippines. Targeting and removal of the most critical constraints will lead to the highest returns and will spur investment, which will lead to sustained and high growth and create more productive employment opportunities, the ADB said.

Firstly, the fiscal situation remains tight despite the government making good progress to reduce deficits and aims to balance its budget in 2008.

Secondly, declining public and private sector investments in infrastructure have led to inadequate and poor infrastructure and bottlenecks, which have raised the cost of doing business and eroded the country's competitiveness and attractiveness to foreign and local investors, ADB said.

Thirdly, poor performance on key governance aspects, in particular, control of corruption and political stability, has eroded investor confidence.

Poor infrastructure and weak investor confidence have led to weak flows of foreign direct investment (FDI), ADB said.

The report said the government's inability to address effectively market failures of various kinds may have also hampered expansion and diversification of its industrial base and noted the need for the government to play a more proactive role in overcoming coordination and information failures.

The report said the government can support its development agenda through broadening access to education, training and health services, instituting more effective and better funded development programs at local levels, and improving targeted social protection and disaster relief.