World Bank: RP lagging in economic ‘renaissance'

What economic take-off? Mrs. Gloria Arroyo is spreading lies around the about economic gains under her watch.


RP lagging in economic ‘renaissance,’ says WB

Daily Tribune 06/05/2007

While the World Bank (WB) proclaimed yesterday that an economic renaissance has started in Asia, it noted that the Philippines is among the underperformers with 41.9 percent of its 83 million population living in poverty.

The WB defined the poverty level as an income of less than $2 (less than P100) a day for an individual.

WB country director for the Philippines Joachim von Amsberg, in a briefing during yesterday’s launch of the WB study — An East Asian Renaissance: Ideas for Economic Growth — said the country “has for a long time had the potential for dynamic growth and sustained poverty reduction but development outcomes have lagged behind this potential.”

The study noted that in 2005, the level of poverty in the Philippines was exceeded in the region only by Cambodia, Laos, Vietnam and Indonesia.

In WB’s poverty headcount on the percentage of population living below $2 per day, East had a median of 31.3 percent in 2005, with Korea having less than five percent of its population as poor under the definition, Malaysia, 5.5 percent; Thailand, 22.8 percent; China, 28.6 percent; the Philippines, 41.9 percent; Indonesia, 44.4 percent; Vietnam, 49.1 percent; Cambodia, 62.1 percent and Laos, 68.6 percent.

The WB said low investments are what keeps the development in the country at snail’s pace.

“Deepening of reforms to improve tax revenue collection, to improve the quality of public spending and reduce corruption, and to improve the investment climate through infrastructure and effective competition in key sectors would help raise the investment rate from its current extraordinarily low level,” Von Amsberg said.

“A higher investment rate would make higher growth sustainable, generate more jobs and income and reduce poverty more rapidly,” he said.

Thus, he raised the importance of increased economy of scale, more regional trade with the other Asian countries and higher quality of education.

Von Amsberg said while macroeconomic fundamentals were strengthened particularly in the fiscal position, more focus should be given to investments since it remains below 15 percent of gross domestic product (GDP) against the 20-percent to 30-percent share in other East Asian countries.

“The Philippines has already seen and is reaping the benefits of the right policies in the telecommunications industry. We hope other key sectors, particularly maritime and aviation, will soon follow suit,” he stressed.

On the country’s 6.9 percent GDP growth, Von Amsberg said the WB will have to see how the growth will be sustained.

“The challenge right now is that the good news could create complacency. The good news could lead to a situation where the gains from this very good situation might be lost,” he added.

Homi Kharas, one of the two authors of the latest WB study on East Asia, said the improvement in East Asia right now is “something quite new.”

“The old Asia relied on the famous flying geese analogy that saw mature industries move to low-wage countries. The new Asia is more innovative and networked —it’s characterized by a very competitive business environment that encourages new products and processes and a labor force able to absorb new ideas,” he said.

He added compared to countries in the East Asia, the Philippines is “doing well on trade side, okay on the finance side but quite poorly on innovation in research and development, management of cities and absorption of people in the cities, rural/urban divide and on corruption.”

Indermit Gill, co-author of the East Asia study, said “(East Asia) cities are at the core of development strategy based on international integration, investment and innovation.”

He said, “East Asia is witnessing the largest rural-to-urban shift of population in history.”

“Two million new urban dwellers are expected in East Asia cities every month for the next 20 years. This will mean planning for and building dynamic, connected cities that are linked both domestically and to the outside world so that economic growth continues and social cohesion is strengthened,” he added.