MANILA, 13 September 2006 — A top World Bank official yesterday said the Philippines needs to push ahead with dramatic economic reforms or risk being left further behind by its Asian neighbors.
Speaking at a forum on good governance in Manila, Managing Director Juan Jose Daboub said that while the Philippines was doing well in carrying out key fiscal reforms, it needs to do more in curbing corruption.
“The Philippines is not reaching its full potential and may be facing the risk of falling further behind the rest of its Asian neighbors,” he said.
He cited the rapid growth of China and India but also noted that Vietnam, which once lagged behind the Philippines, had shown remarkable success, cutting in half the number of its poor in just about 15 years.
Daboub said this was happening in a “closed society (with) no political freedom but economic freedom has started to pick up,” thanks to market reforms.
In contrast, the Philippines, with an open democracy, free press, well-educated population, and active private and civil sector, was still struggling to bring more of its population out of poverty.
He noted that a previous joint World Bank-Asian Development Bank (ADB) survey found the two major obstacles to more investment in the Philippines were macro-economic instability and corruption.
Daboub said the Philippines was now showing improvement with the passage of key fiscal reforms that were reducing the budget deficit, allowing more money to go to investment, social services and education.
But corruption remains a major hindrance to foreign investment and the Philippine government needs to be more transparent in the use of public funds, he said. “Now that the Philippines is implementing several reforms for macroeconomic and fiscal stability, there is the breathing space for addressing some of the difficult structural issues of governance, including more effective and transparent collection of taxes and better quality of public spending,” he said.
The government’s move to expand the base of its value-added tax and increase the rate to 12 percent from 10 percent has boosted public revenue and put the country on target to achieve a balanced budget by 2008.
But a recent World Bank report ranked the Philippines 126th out of 175 countries in terms of investor-friendliness. Vietnam, for instance, which 15 years ago was a relatively closed society with an underdeveloped economy, was 104th.
“It seems very clear that there is real urgency if the Philippines is to gain a larger share of the investments now coming into Southeast Asia,” he said. Among the measures he suggested was to reduce the size of the state, saying this would also reduced the chance of misuse of funds while raising the activity of the private sector and civil society.
He also said it was up to the government and the people of the Philippines to improve governance, increase transparency and the accountability of state institutions. (With reports from Agencies)
