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By Justine Irish D. Tabile, Senior Journalist
The Philippines’ ambition to become the next engine of economic growth in Southeast Asia depends on the ability of the private sector to invest, expand and innovate with confidence, says the World Bank (WB).
The message today is: better jobs and prosperity for Filipinos require better conditions for firms to invest, grow, develop and become the next growth engine of ASEAN (Association of Southeast Asian Nations),” Zafer Mustafaoğlu, World Bank country director for the Philippines, told the BusinessWorld Economic Forum on Monday.
He warned that the US-Israel war against Iran, which has driven up oil prices, is slowing economic activity and putting pressure on inflation.
The Philippine economy grew a weaker-than-expected 2.8% in the first quarter, as rising oil prices and the lingering fallout from past domestic scandals weighed on activity.
Inflation rose to 7.2% in April, above the Philippine central bank’s forecast and target for the second month in a row.
Mr. Mustafaoğlu in his keynote speech said that the weakness of investment is the most worrying because it shows few expansions, improvements and product development which ultimately limit the creation of job opportunities.
Gross domestic product contracted by 3.3% in the first quarter, pulling back from a 4.5% gain last year but improving from the previous quarter’s decline.
BusinessWorld President and Chief Executive Officer officer Miguel G. Belmonte said the Philippines’ ASEAN chairmanship highlights both the opportunity and the need to address domestic competitiveness gaps.
“ASEAN has no shortage of structures and roads, from economic initiatives to sector-specific agreements,” he told the forum. “This region has expressed its vision to be one of the largest economies in the world by the end of the decade.”
He said the goals of ASEAN integration are well defined, but the Philippines must address infrastructure and pro issuesductivity barriers to get the most out of it.
Jamil Paolo S. Francisco, executive director of the Asian Institute of Management – Rizalino S. Navarro Center for Competitiveness, said the Philippines is standing. in global rankings despite earlier gains.
He said productivity gaps remain wide, as the country produces very little per worker compared to regional peers such as Thailand.
“Competition can be tricky because it’s a race,” he said. “Development is a marathon, not a sprint. But here’s the thing – in this marathon, we’re lagging behind.”
Anthony Oundjian, managing director of Boston Consulting Group Philippines, said the Philippines lags behind its ASEAN peers in terms of output.
“While we have the demographics and the consumer market, we are really lacking in productivity per worker,” he said. “We’re about a quarter of Thailand’s productivity per worker.”
He added that predictability in policy implementation is important for long-term investment decisions.
Grab Philippines Managing Director Ronald Roda said different local requirements are hindering business expansion in all cities and municipalities nationwide.
Mr. Mustafaoğlu said the Philippines can still attract more foreign investors and move up the artificial intelligence (AI) value chain if reforms are accelerated.
He said delays in permits, traffic at the port and complicated paperwork are still increasing costs and discourage firms from expanding.
He called for changes in business registration, border management and trade agreements to improve competition and reducing transaction costs.
He said business registration in the Philippines takes about 78 days compared to one day in Singapore and two in Malaysia.
He also said that it hadfHard border processes act as a hidden tax that increases costs and slows supply chain integration.
He added that expanding free trade agreements would increase productivity through cheaper materials and stronger competition.
“The country already has a place,” said Mr. Mustafaoğlu. “Through semiconductors and intermediate inputs, the Philippines is already connected to the hardware side of AI. the country has not had a full chance.”
He said the Philippines must move beyond assembly activities to higher value-added activities such as design support, testing and AI-enabled services. services to remain competitive in the region.
