Philippines: Philippines’ Development Authority Building foundations for sustainable development

In this interview with The Worldfolio, Mr. Ernesto M. Pernia (PhD), Secretary of Socioeconomic Planning at the Philippines’ National Economic and Development Authority, speaks about efforts to bring about development and better social inclusion and the ‘0-10 point’ socioeconomic schedule.

On May 9th of 2016, president Rodrigo Duterte was elected with additional than 39% of the vote giving him a 15-point victory over the second best performing candidate. While a lot of western media were caught offside by the landslide victory, the people of the Philippines truly believe in the message of social inclusiveness, economic decentralization and social order; as shown by his 91% approval rating in a little while next the election. What is your take on the election results and what are the major drivers behind it?

The outcome of the election was highly unexpected for a lot of people. The voters had underestimated the major supporters of the current President. A lot of thought the supporters would comprise mainly of the poorest 40% of the people. It was in fact a cross section that included supporters from the middle class, upper middle class, and the privileged segment of the people – all in varying degrees.

The result could as well be attributed to Duterte’s ability to connect with the masses during his campaign. His messages resonated well part the middle gain, lower-middle gain, and lower gain classes. Although his style of speaking is unconventional, it apparently was able to strike a nice chord with the bigger masses of the people.

At the start of the campaign period, Duterte did not garner much in the opinion polls and ratings. He may not have been well-known across the country except in his home region, but he was able to excite a large group of people with his vision and plans.

While positive macroeconomic indicators such as GDP increase are nothing new in the Philippines, the government has put in place a 0-10 point socioeconomic schedule to make sure that these indicators trickle down to the real economy. How significant is social inclusion and economic decentralization for the Philippines?

One of the major issues that Duterte highlighted in his campaign was social inclusion. This appealed to a great mass of people who felt that they have been excluded from development.

The previous government has done well in improving economic increase at the macro level – resulting in low interest rates, very moderate and stable inflation, ample fiscal space, and as well recent cutting down of the deficit to GDP ratio. As these well-improved macroeconomic indicators persist until today, the current economy continues to benefit in terms of macroeconomic increase.

However, much has to be done to address the long-standing problem of inequality and poverty, which is greatly felt by a large people that belong to far-flung regions. Those who are fortunate enough to feel the effects of development are the people from Metro Manila and the regions surrounding Metro Manila which contribute about 2/3 of the total GDP. The other 14 regions share just 1/3 of the total GDP and feel excluded being out of the boundaries of development. These people and others from all over the country saw in Duterte a better possibility for the kind of change they were yearning for, and this from presently on led to his victory in the elections.

What role can we expect the private sector to play in this process?

Efforts in bringing about development and better social inclusion have been led by the government through the provision of both hard and soft infrastructures. Hard infrastructure includes projects such as transportation (e.g. construction of roads), while soft infrastructure covers quality education and healthcare services that should be made widely available to the people. Upon achieving those, major changes in the degree of poverty and inequality will be felt in a short span of time. At the same time as there is better physical infrastructure and human capital in the regions, the private sector will be additional encouraged and incentivized to invest in those regions and, therefore, create additional job opportunities. That would be their contribution to the development of the country.

The government has set its objectives to play a additional crucial role within the region. The Philippine economy was a top performer in South-east Asia in 2016 with a YOY increase of 6.9%, up from the 6.1% posted in 2015. For 2017, the Philippines is expected to grow up to 7.5% on the back of strong domestic request and an expansionary budget with appropriate emphasis on infrastructure and human development. Domestic request has been credited as one of the major drivers of increase, what role has it played in protecting the Philippines from external shocks in the current world conditions?

The majority practical defence against the negative impacts of the world economy would be to stimulate internal request, private consumption, and investment spending. That would be made possible with the use of the government budget and the variety of funding sources available to the country presently.

Because of the President’s positive relations with China, we presently have a buffer against Trumpism. Trump’s economic policies are completely uncertain that we cannot foresee how things will pan out in the long run. That is the kind of uncertainty besetting not just the Philippines but as well the world economy.

Infrastructure is a large item on the 2017 budget representing 5.3% of GDP and the government plans to invest up to 7.4% of GDP by 2022, what impact do you expect as a result of this infrastructure golden age policy in real terms?

There was large underspending during the previous government. Since the government could not decide quickly on projects to approve, project execution was inevitably delayed.

Most of the infrastructure projects today should be concentrated in the far-flung regions so as to provide public services and create jobs for people in those areas. Holding just as much importance would be investment in social infrastructure such as in the areas of education and healthcare.

On the other hand, investments and spending in infrastructure in Metro Manila and the surrounding regions should focus on eliminating traffic crisis and reducing congestion.

And what is the role of the hybrid PPPs?

Funding from China or Japan is considered an ODA, but it can as well be blended with the PPP approach or with the government funding from the General Appropriations Act. Given the a lot of combinations and permutations as far as funding is concerned, our funding from China can be co-financed with the ADB or the World Bank. It is truly beneficial for us to have a variety of funding sources that we can choose from. Part the competing ones is Japan who used to be soft and reserved in terms of approaching us. Presently, they are additional active as a result of China becoming additional aggressive.

The Philippines is currently refocusing its efforts towards deeper regional integration, this shift in policy has by presently resulted in ODA commitments worth over USD 19 billion from China and Japan alone, the highest all in the initial 6 month of any presidency. FDI in 2016 as well recorded an impressive 22% increase from 2015, the major source was Japan which is as well the second biggest trading partner of the Philippines. What impact do you expect to see from a deeper regional integration? How would you define the current investment climate of the Philippines for the Japanese private sector under the JPEPA?

It seems that the current investment climate is going to be better given the better interest shown by China, Japan and other nations. The Japanese private sector usually takes action and follows through since they seem to work in tandem with the government.

What would you highlight as the major opportunities for companies such as Mitsubishi Financial group or Murata which have accompanied Prime Minister Shinzo Abe’s sentiment towards the Philippines?

In October of last year, we had an economic forum in Japan wherein we as well met with several Japanese businessmen. They have been made aware of the a lot of opportunities here in the Philippines, with communications technology being one of them. Next presenting the opportunities to them, it seemed they will be offering their help in a lot of development projects any minute at this time.

The major improvements to be expected include relieve of doing business, relieve of entry of investments, and minimization of corruption in the country.

Initial, the proposals regarding the relieve of doing business will be welcome, since red tape would be cut drastically and processing will be finished much faster.

As well, there is the promise of the President to present a clean government to the people. Although some corruption can still persist, it is expected to be minimized which would, in turn, hopefully, instil additional confidence part investors.

What positive impact do you expect for the Filipino people as a result of better partnership/synergies between the private sector of both nations?

Investments always bring about jobs, and naturally the increase in jobs has the capability of improving people’s gain. There will be a bigger impact if the investments have a strong technical component to be adopted. An investment is not only valued for its financial aspect, but as well for its potential technological capacities and benefits.

How will the three pillars of the PDP 2017-2022, aiming to realize AmBisyon Natin 2040, contribute to social inclusion, the increase of the middle class, the establishment of a knowledge-based economy, and from presently on sustainable economic increase?

The three pillars have by presently been approved for official adoption just recently. The initial pillar is solidarity or the strengthening of social fabric. In Tagalog, the word is malasakit. This refers to what binds the country together. With a strongly bonded society, a additional cooperative spirit will be established part the people. There will as well be a boost in trust part one an extra, between the citizens and the government, and between businesses. For example, there would be no need to present so a lot of ID cards to prove your identity or authority if trust within the society is strong. This would allow for transactions to be facilitated and concluded quickly. Malasakit as well implies compassion towards your fellow neighbours and compassion between different social classes.

The second pillar is pagbabago, which refers to the inequality-reducing transformation of society and the government. This is significant to our country wherein the reduction of inequality should result poverty reduction. This paves the way for a additional inclusive increase.

Lastly, there is patuloy na pag-unlad. This involves enhancing or strengthening the increase potential of the economy, not just for the short and medium term, but as well for achieving a long-term vision.

How far along are you and what still needs some work or additional focus?

The AmBisyon Natin 2040 and the PDP have both been well received during consultations. These consultations cater to a broad range of groups that include the business sector, different civil society groups, non-government organizations, inclunding stakeholders in the regions. This is not just an output of NEDA, but as well of the people that have been consulted. This is something we worked on along with the different departments of the government.

The PDP, on the other hand, takes off from the 0-10 point socioeconomic schedule, and it is anchored on the Ambisyon Natin 2040, which emphasizes the collective long-term vision and aspirations of the Filipinos for themselves and the country in 2040. The PDP 2017-2022 will be the foundation for the three subsequent development plans that will lead to the realization of Ambisyon Natin 2040.

Aside from the three pillars of the PDP, there are two specific strategies that will support inequality reduction and increase in increase potential. Initial is enabling the macroeconomic environment, which involves maintaining a sound fiscal and monetary policy, low interest rates, low deficit to GDP ratio, and low budget deficit. Second is levelling the playing field by institutionalizing a mechanism for implementing the National Competition Policy.

In addition to these are bedrock strategies that will support all three pillars of the PDP, such as accelerating strategic infrastructure development and ensuring security, public order and safety, part others. It may be noted that part of the 0 in the 0-10 point socioeconomic schedule are ensuring internal and external security as foundations for sustainable development. This is the peace and order that the President has been trying to pursue and achieve for the country.