Core
Business World, 21 May 2014

 

During the World Economic Forum for East Asia, arguably the grandest economic show in town during President Aquino’s four-year watch, he and his economic men are expected to boast of the strong GDP growth in 2012 and 2013 and the recent S&P investment upgrade. The more discerning foreign guests won’t be fooled. They know that more needs to be done to sustain strong growth and make it inclusive.

The foreign guests would know the severity of the twin problems of joblessness and poverty. They would know the sad state of Philippine infrastructure experience. They have no choice. As they fly in, they would experience, first hand, the aging, dilapidated, and swelteringly uncomfortable Ninoy Aquino International Airport.

The recently released results of the IMD World Competitiveness Yearbook 2014 suggest that the two-year strong economic growth might be losing steam. Compared to its ASEAN-5 peers, the Philippines ranked last, unchanged from last year, but four notches lower. Meanwhile, Singapore, Malaysia, and Indonesia improved their rankings by two, three, and two notches, respectively.

On economic performance, the Philippines’ ranking during the last five years has been erratic, though on a downward trajectory. It was 34 in 2010, up to 29 in 2011, worsened to 42 in 2012, up again to 31 in 2013, and then sharply down to 37 in 2014. In its latest ranking, Philippines ranked miserably in international trade: 55 in 2013 and 57 in 2014.

GOVERNMENT REFORMS LOSING CREDIBILITY

Reforms in government, or the credibility of its reform program, may be losing credibility too. The Philippines’ ranking on government efficiency fell steeply to 40 in 2014, from 31 in 2013. It was ranked 31 in 2010, 37 in 2011 and then 32 in 2012. The weak institutional framework and lack of business legislation, including lack of competition laws, weighed down the rank heavily in 2014. The Philippines’ ranking with respect to institutional framework dropped from 33 in 2013 to 40 in 2014. As a result of lack of business legislation, the Philippines’ ranking worsened from 51 in 2013 to 54 in 2014.

On business efficiency, after a steady climb in ranking from 2010 (32) to 2013 (19), the Philippines’ ranking nosedived to 27 in 2014. The sharp fall was attributed to poor finance (from 26 in 2013 to 27 in 2014) and management practices (from 24 to 33).

On public infrastructure, the Philippines’ ranking hit rock bottom after several years of steady deterioration: it was 56 in 2010, 57 in 2011, 55 in 2012, 57 in 2013, and 59 in 2014.

Compared to its ASEAN-5 neighbors, the state of public infrastructure in the Philippines is pitiful. Yet, while the infrastructure gap is widening and the funding requirements are great, the government’s response has been inadequate. The Aquino administration failed to allocate enough resources for infrastructure spending; and what little resources that have been authorized by Congress, it failed to spend fully.

In terms of infrastructure, the Philippines was the only country among its ASEAN-5 peers whose rank was downgraded, from 57 in 2013 to 59 in 2014. Its score was the lowest among its peers, and the second lowest among the 60 countries that were included in the 2014 IMD World Competitiveness study. Its score of 1.7 is puny compared to Singapore’s 62.8 and Malaysia’s 45.2.

GLIMMER OF HOPE

An unsolicited proposal coming from Ramon Ang of San Miguel provides a glimmer of hope for finding a solution to the aging and dilapidated Manila airport. The proposal is to construct an airport that would have four runways, 164 contact gates, and could accommodate more than 100 million passengers per year. The plan is impressive, massive and visionary.

The $10-billion airport promises to be a game changer: it will change the Philippines’ economic landscape in general and its state of public infrastructure in particular. It will lend credibility to the government’s program of promoting tourism, one of the legs of the strong, sustainable and inclusive growth plan.

Is there reason to be hopeful? Yes, if the Aquino III administration acts on the San Miguel airport proposal with a great sense of urgency. No, if it’s business-as-usual. Remember: to date, after years of delay, vehicle owners are still waiting for their registration stickers and car plates. Only in the Philippines!