Press Releases Archived (February 2014)

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The inclusive growth mantra has to be further asserted in the ASEAN Economic Community (AEC), said Dr. Cielito Habito, former Director-General of the National Economic and Development Authority (NEDA) and Chief of Party of the USAID Trade Related Assistance for Development, during the 4th Final Workshop of the ASEAN Beyond 2015, a project of the Economic Research Institute for ASEAN and East Asia (ERIA). State think tank Philippine Institute for Development Studies (PIDS) co-organized the event held at the Carlos P. Romulo Hall, NEDA sa Makati Building.

According to Habito, ASEAN trade relations must be competitive rather than complementary. "The Philippines has a predominantly intra-industry trade with the rest of the ASEAN countries, especially with its major trading partners in the region, meaning we trade in products within the same industries. The Philippines' top exports to its major ASEAN trading partners are petroleum products, electronics, and chemicals, the same products that we import in the region," Habito noted.

Habito also commented on the budget misallocation in the agricultural sector, where 70 percent of the commodity budget goes to rice yet it is only responsible for only about 16 percent of the value adding in agriculture.

He considers the growth potentials of the services sector. "The Philippines has much more growth in the services sector because there are lots of value adding within this sector such as in design and software."

Meanwhile, UP Professor Emeritus and first NEDA Director-General Dr. Gerardo Sicat accentuated the negative impacts of the country's governance and political issues on our investment performance. The changes of government have caused reversals of economic policies and the effects of these reversals were very costly, Sicat said.

Sicat explained that the Philippines is the only country in the ASEAN that has complex constitutional provisions on economic issues. "We have restrictions on capital, landownership, public utilities, and operation of land mineral resources, which not all foreign investors could deal with," he said.

PIDS Senior Research Fellow and Acting Vice-President Rafaelita Aldaba stressed that the Philippines should not rely on the services sector alone if we want economic growth to be inclusive. Aldaba noted the urgent need for the revival of the manufacturing sector to increase the country's competitiveness in the region. A more vibrant manufacturing sector also means more jobs available for Filipinos. "There has been very little movement of resources in the Philippine manufacturing sector. Its share of value added to GDP declined to 23.7 percent in the 2000s from 26.3 percent in the 1980s."

ERIA Senior Researcher Ponciano Intal noted that ASEAN competitiveness has to be strengthened to sustain high and equitable growth beyond 2015. The Philippines needs an enabling policy and regulatory environment to meet the desired targets of eliminating dire poverty, reducing poverty rates by at least two-thirds, and reducing youth illiteracy rate and malnutrition. "There should be greater focus on food security as it remains to be a significant concern in the ASEAN," Intal said.

PIDS President Gilberto Llanto stressed the need for ASEAN countries to focus on border and beyond-the-border issues. "We also need to cascade the implications of AEC 2015 to our policymakers, especially to those who still are not aware of what AEC 2015 is."





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Competition agencies and nongovernmental organizations across the globe celebrated World Competition Day on December 5 under the theme "Impact of Cartels on the Poor". This day coincides with the day the United Nations General Assembly passed the UN set of principles and rules on competition. Cartels are motivated by greed and the desire to reduce competition. Without competition, cartels steal and rob from the public.

In the Philippines, cement is one sector where perennial price increases have always been a complaint despite the removal of tariffs. Other competition issues include exclusive dealing in canned tuna, interconnection problems in telecommunications, and high cost of shipping. Weak competition is detrimental particularly to ordinary consumers especially small and medium businesses.

Philippine Institute for Development Studies (PIDS) President Dr. Gilbert Llanto stressed that we cannot overemphasize the need for competition policy and competition law to ensure market contestability and regulate anticompetitive business practices. Without any competition law, there is a risk that market reforms may not be enough to foster effective competition.

In June 2011, President Aquino signed EO 45 designating the Department of Justice as the countrys competition office. While the creation of the Office for Competition is an important step, the legal framework is still to be deliberated at the House of Representatives and the Senate. PIDS Vice President Rafaelita Aldaba emphasized that strong political leadership would be necessary to legislate an effective competition law. In many developing countries, implementation is the Achilles heel of competition. Hence, it is important for us to design competition law and regulations that could be effectively implemented.

Aldaba further noted that there is no one-size-fits-all policy. Taking into account the stage of our economic development, policies, institutions, and resources, a gradual but steady implementation may be the proper approach to follow. The institutional ingredients that make ambitious competition systems feasible in developed countries hardly exist in a developing country setting such as ours and will only take time to build. Both Llanto and Aldaba agreed that to get there, we need to continue building our capacity and to focus on information dissemination and education, such as case studies of good practices. For our advocacy work, we should focus on the removal of regulatory barriers to services such as allowing foreign participation by relaxing the 60-40 percent rule in ports and shipping. For our enforcement agenda, we need to be selective and to pick cases that would generate positive response from the public to build the competition bodys credibility.

Currently, PIDS, in collaboration with the Customer Unity and Trust Society (CUTS) International of India, is implementing the Competition Reforms in Key Markets for Enhancing Social and Economic Welfare Project. This project aims to assess the state of competition in the rice and passenger transport sectors and quantify the competition benefits for both consumers and producers arising from reforms undertaken in these sectors. Dr. Llanto stressed the need to ensure that consumers realize the potential benefits from an effectively implemented competition regime. This project is one way of making people more aware of the benefits from competition and the need to legislate an effective competition law to accompany market-oriented reforms.

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A new book containing the outcome of the Forum on ASEAN Energy Market Integration (AEMI) held on August 27 " 28, 2013 in Bangkok, Thailand, has been released by the ASEAN Studies Center. Two of the seven chapters of the book were co-written by Dr. Adoracion Navarro, a senior research fellow of state think tank Philippine Institute for Development Studies.

Titled ASEAN Energy Market Integration (AEMI): from coordination to integration, the book contains seven papers authored by AEMI Group members as a first step toward providing the analytical underpinnings for the rationale of the AEMI, its building blocks, and implementation. Navarro co-wrote the chapters AEMI and ASEAN energy poverty and The pathway to AEMI.

The AEMI Group is a network of academics from universities and research institutes across the ASEAN. It aims to promote free flow of energy products, services, investments, and skilled labor across the ASEAN through 2030, within the framework of the ASEAN Economic Community.

The AEMI Forum aimed to foster the dialogue between ASEAN policymakers and the members of the AEMI Group. It was convened by the Chulalongkorn University and the AEMI Group, with the support of the ASEAN Secretariat and the ASEAN Center for Energy.

Navarro is one of two Philippine representatives to the Forum participated by government and research officials of ASEAN countries and other international organizations and research groups. She has a Ph.D. in Economics from the University of the Philippines and a Master of Public Administration in Economic Policy Management from Columbia University. Her fields of expertise are infrastructure, electricity markets, and public-private partnerships.

A copy of the book is available at the PIDS Library. For more information, please contact the ASEAN Studies Center, Chulalongkorn University, through email: asean@chula.ac.th or by visiting their website at www.asean.chula.ac.th.

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Quality of infrastructure in the Philippines is second to the last in the ASEAN region. This was disclosed by Dr. Adoracion Navarro, Senior Research Fellow of the Philippine Institute for Development Studies (PIDS), during the forum "Financing Infrastructure in the Philippines " held at PIDS.

In the Global Competitiveness Report 2012-2013 of the World Economic Forum, the Philippines is ranked 98th among 144 countries in terms of quality of overall infrastructure. Philippine infrastructure is worse than Cambodias, Navarro said.

In the ASEAN region, the only country the Philippines overtook was Viet Nam that placed 119th, the ASEAN nation with the poorest quality of infrastructure. Ranked first in the region is Singapore, which is second overall among 144 countries. Malaysia was ranked 29th; Brunei Darussalam, 43th; Thailand, 49th; Cambodia, 72th; and Indonesia; 92th. Lao PDR and Myanmar are not included in the ranking.

The Philippines got the lowest rank in terms of quality of port infrastructure (120th) and air transport infrastructure (112th). This is clearly worse than Cambodias 69th and 75th ranking in port and air transport infrastructure, respectively.

Navarro attributes this poor turnout to underinvestment in infrastructure. In 2012, only 11 percent of the total appropriated budget for infrastructure was spent"a scenario that has not changed since 2010.

Navarro said the decreasing reliance on official development assistance (ODA) loans also contributed to the low quality of Philippine infrastructure. In 2012, ODA loans for infrastructure was more than US$5 million, which was relatively smaller than the figure in 2008 which was over US$6 million.

As of 2013, there are 21 projects in the pipeline under the Public-Private Partnership scheme. Required investments in 18 of these projects are projected at US$5 billion. Three of the 21 projects do not have cost estimates yet.

Navarro challenged stakeholders in the financial sector to take advantage of the liquid financial market given the huge projects costs in infrastructure and the single borrower limits faced by banks in direct lending. Given the maturity of lending capital by Philippine banks (10-15 years) and the long gestation of infrastructure projects (25-30 years), the government could facilitate the creation of credit enhancements for infrastructure bonds that can be issued by private issuers.

The government should also organize a group of experts from both the private and public sectors to formulate clear mechanisms and an institutional setup to mobilize bank resources for infrastructure financing, said Navarro.