Nouriel Roubini details ‘shopping list’ for Philippines

 

MANILA, Philippines – While renowned economist Nouriel Roubini has been all praises on account of the Philippines’ strong macroeconomic fundamentals, there are a few things that the country still needs to do. 

Roubini, who spoke at the Philippine Investment Summit 2013 on Wednesday, January 30, shared his views on the Philippine economy with the aim of convincing ratings agencies to finally grant the country’s long-awaited and much-anticipated investment grade rating this year.

He balanced his views with a ‘shopping list’ for the Philippines on how it can sustain its exemplary economic performance in recent quarters. 

1. Access to credit

Roubini said this is part of improving the country’s business climate. He said improving access to credit especially for small and medium enterprises as well as agriculture-related firms will grow these labor intensive sectors. Underemplyment and unemployment, Roubini said, are main challenges for the country.  

He added that access to credit in the housing sector will also contribute to economic growth. “Further liberalisation in the right direction imply that economic growth can be strengthened by having the right financial system where the right balance between banks and the capital market is considered.”

2. Competition law

Roubini believes legislating a competition law will help the country sustain high economic growth for years to come. Having “not too many oligopolies” will be one of the ways to boost economic growth. 

He added that more competition could also be ushered in by the improvement of the business climate. Roubini said having more foreign firms in the Philippines will encourage competition so that people will get better goods and services. 

The country is now in the process of drafting a competition law which has been tagged by the President as priority legislative measure. The bill, however, is still being deliberated on in both houses of Congress. 

3. Liberalization in terms of investments

If the Philippines want to increase investments, Roubini said one surefire way is for the country to take the bull by the horns by tackling limitations on foreign ownership. He said that while he understands that there are limitations on this as stated in the constitution, there are ways of skirting the rule legally. 

Roubini said liberalizing foreign direct investments is going to be “very positive” for the economy. He said liberalising FDIs, especially at this time when the ASEAN integration is just around the corner, would be very beneficial. 

The Philippines is in a better position now to do this with its strong macroeconomic fundamentals, he noted, adding that the country can still compete because it has already found its niche in the services sector. This is as good as any competitive advantage in manufacturing, industry, or other sectors. 

“The best thing to do is to think about your comparative advantage — service comparative advantage. Exports of services has led to successes in places like India, like the Philippines. So if your BPO, outsourcing industries are going to be growing very fast, generating a lot of foreign currency revenue, that’s a form of exports,” Roubini said. 

4. Resolving the mining issue

If the Philippines will be able to resolve the issues surrounding the Aquino administration’s new mining policy, as embodied in Executive Order No. 79, the mining sector would be a strong source of growth for the economy. 

Roubini said the Philippines has a lot of potential in mining because of its rich natural resources. If this potential can be realized, the country could have a larger share of the global mineral trade. 

“I think everybody recognizes that you have to be careful about the environment, that you have to be careful about sharing the benefits between the mining companies. But maybe legislative change can accelerate the approval of new projects, it will become a source of greater economic growth. This has to be done fast and soon,” Roubini said.

5. More infrastructure

The government must ensure that it invests more in infrastructure, whether through Public Private Partnerships (PPP) or private or public investment. Roubini added that these projects must be undertaken in an efficient, transparent, and timely manner.

He said that the country’s infrastructure to Gross Domestic Product (GDP) ratio, while improved at 3%, is still below the World Bank’s recommendation of 5%. 

In 2012, the Philippine government disclosed that it was able to rollout, or start the bidding process for, 8 PPPs. Finance Secretary Cesar V. Purisima also said that the process, which took awhile, was able to help the country create a pipeline of projects that would contribute to the goal of creating more jobs and reducing poverty. 

6. Invest in people 

Roubini said high and sustained economic growth cannot happen if the government does not invest in human capital. He said investing in people means putting more money in education and skills training so that members of the labor force will be able to successfully take advantage of the opportunities in the labor market. 

Further, he said that investing in better healthcare and social safety nets will also help the labor market cope with health-related emergencies and other personal calamities. 

7. Disaster risk management

The economist also urged the national government to invest more in disaster risk management. As one of the countries that are prone to climate changes, the Philippines should be more proactive in this area. 

Roubini said global climate change is something that the country cannot solve on its own but at least it will be in a better position to cope with the disasters that could come its way. 

8. Greater openness to the world

Finally, Roubini said no country is an island. Countries like the Philippines should embrace integration more, should be more open to the global economy. This is because it will increase the market for the country’s products and services. 

He said that while it is good that the Philippine economy is backed by a strong domestic market, having the global market to turn to will only increase the country’s opportunities for growth. 

While it was true that opening to the global market will also increase the susceptibility of the country to external shocks, such as the Global Economic Crisis of 2009, the country is in a better position to face these shocks. 

“We live in a global economy where no country is truly an economic island, given trade winds, financial winds, commodity, currency, confidence happening around the world affects of course an economy but what an economy can do to become resilient is not to try to isolate itself from the global economy through trade but by making it more open,” Roubini said. – Rappler.com