Groundwork for long-term economic growth

A few months ago, President Ferdinand Marcos, Jr. approved the Philippine Development Plan 2023-2028, which intends to “reinvigorate job creation and accelerate poverty reduction by steering the Philippine economy back to its high-growth trajectory and effect economic and social transformation for a prosperous, inclusive, and resilient society.” This plan is anchored on AmBisyon Natin 2040, an ambitious 25-year vision that hopes to see Filipinos enjoying “strongly rooted, comfortable, and secure lives.”

The plan outlines several socio-economic targets, such as maintaining annual economic growth rates of 6-7% in 2023 and 6.5-8% from 2024 to 2028, creating more resilient jobs, ensuring price stability, enforcing fiscal discipline, transforming production sectors through innovation, and reducing poverty incidence from 18% in 2021 to 8-9% by 2028.

The intended beneficiaries of this master plan are the citizenry, businesses, and related stakeholders in society at large. A critical engine of national growth and development are the businesses that drive the economy and generate jobs for millions of Filipinos.

However, data from the Philippine Statistics Authority (PSA), indicate that there were just over 1.08 million business enterprises operating in the country in 2021. Some 99.58% of these enterprises are micro, small, and medium enterprises (MSMEs). Less than 1% of the total are large enterprises. In view of the wide disparity between the number of large companies and MSMEs, it becomes obvious why the average salaries of many employees in the Philippines are low, given that MSMEs have tight resources to provide for more. Even then, the PDP is aiming at the basic point of creating jobs to help alleviate poverty. The paradox is that, amid this reality, many prospective foreign investors find Philippine wages to be somewhat high, which is why they choose to relocate to India and Vietnam instead. Aside from this, the general sentiment that the cost of doing business in the Philippines is relatively high as well.

Considering the geopolitical dynamics in the region, enterprises, whether big or small, need to be supported by the government and be able to operate in a business-friendly environment for them to flourish and expand. During the Philippine Economic Briefing in Manila following the President Marcos Jr.’s second State of the Nation Address, Department of Finance (DoF) Secretary Benjamin Diokno emphasized that in addition to the economic liberalization measures that opened several sectors to 100% foreign ownership, the Philippine government is further enhancing its policy tools to promote public-private partnerships (PPP). “This will allow us to engage the private sector more effectively in the funding and implementation of high-impact infrastructure flagship projects (IFPs), which will significantly enhance the quality and pace of infrastructure development in critical sectors,” he added.

In the same vein, National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan stated that the government is committed to creating and fostering an enabling policy and regulatory climate that encourages investment, innovation, and high-quality job creation.

Specifically, the government will also continue its initiatives in strengthening the PPP framework, facilitating the efficient assessment of PPPs, establishing a dynamic innovation ecosystem, and monitoring the progress of IFPs and accelerating the country’s infrastructure drive.

Mr. Diokno also noted that the digitalization efforts undertaken by the Bureau of Internal Revenue and the Bureau of Customs have been instrumental in maximizing the government’s revenue potential, simplifying taxpayer compliance, and improving the ease of doing business.

Recently, the Department of Budget and Management (DBM) submitted to Congress the proposed national budget for 2024 amounting to P5.768 trillion, which is 9.5% higher than the current year’s budget. According to the DBM, the 2024 budget will continue to “strengthen the purchasing power of Filipinos, reduce vulnerability and mitigate scarring from the COVID-19 pandemic, and ensure sound macroeconomic fundamentals.”

Notably, among the priorities of next year’s proposed budget is future-proofing the country by improving digital infrastructure and promoting a transparent government that is free from bureaucratic red tape. If successfully implemented, these projects and programs are expected to drive greater efficiency in the delivery of public services and make it easier for businesses to thrive.

Then again, the proper and effective implementation of all these plans and programs is another story. Meaningful outcomes result from a single-minded approach to achieving national goals. Through multi-sectoral collaboration, ambitious targets can be more easily attained, and more stakeholders are likely to benefit.

Given the significant role that businesses play in economic prosperity, such as in boosting productivity, generating jobs, and advancing innovation, it is imperative for the government’s programs and plans to be executed properly and, ultimately, create a business-friendly environment. Aside from initiatives that seek to enhance the bureaucracy’s digital transformation, encourage PPPs, and streamline regulations, it is crucial for the government to ensure transparency and to uphold the rule of law.

From what we see in the way investors plan their operations, job generation alone is not the singular answer to the plight of local workers to get them out of poverty. It requires much more, such as raising the purchasing power of wages through effective control of inflation, lowering the cost of living, reducing the national debt, eliminating corruption, raising tax collection efficiency and proper social interventions to prevent families from falling further in the poverty trap. In other words, good governance.

The real value of national programs can be best judged from actual results. This may be the biggest challenge that policymakers face when they lay down programs whose results will cross decades to reach fruition. As Nelson Mandela once said, “Money won’t create success, the freedom to make it will.”

Venice Isabelle Rañosa is a research manager at Stratbase ADR Institute.