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Thursday, October 23, 2014

Investment community talks up Philippines' economic prospects

Addressing infrastructure bottlenecks will be key for the Philippines if it were to remain one of the brightest spots in Asia, according to participants of the Philippines Investment Conference.

Timothy Moe, chief Asia Pacific regional equity strategist for global investment research at Goldman Sachs, said the long-term growth prospects of the Philippines are among the best in Asia on a trend basis, citing the huge potential to improve productivity and investment accumulation because of the large population and young demographics.

"When you look at the five-year potential average growth rates of the economy, the Philippines is one of the top four in Asia outside China," Moe told participants of the conference organized by the CFA Institute on Tuesday.

However, supply-side constraints will remain a problem for the Philippines and other Asian nations, which have underinvested in infrastructure in the past several decades. Reallizing this, the government recently revived its infrastructure push to include roadshows outside the country to draw in investors.

"If there is potential for appropriate investment in infrastructure, there is significant productivity gains we can derive from that," Moe said.

The Philippine economy expanded by 6.4 percent in the second quarter, recovering from the 5.8 percent in the January to March period, to bring the six-month tally to 6 percent and become the second fastest-growing nation in Asia.

"The port congestion in Manila has underscored the need to accelerate infrastructure development as it plays a critical role in supporting economic performance and upholding confidence in international businesses to partake in local industries," said Finance Undersecretary Jose Emmanuel Reverente.

The Aquino administration has tapped the private sector to accelerate infrastructure development through the public-private partnership (PPP) scheme.

Despite a slow start, the rollout of projects is already picking up, said PPP Center executive director Cosette Canilao, citing the award of eight infrastructure projects worth P127.5 billion since the program took off four years ago.

"Momentum is here already," Canilao said.

The National Economic and Development Authority, which President Benigno Aquino S. Aquino III chairs, last week approved 12 more projects worth a combined P180 billion.

"We now have a very good PPP platform. The appreciation of the local private sector on how to do PPPs has improved a lot. There is an understanding between the government and the private sector on how we do our biddings and finalizing the terms of concession agreements. We now have a proven process," Canilao said.

Department of Public Works and Highways Secretary Rogelio Singson said the government is also investing heavily in the countryside, pouring in 30 percent or P63 billion of the proposed P288-billion budget in Mindanao, excluding calamity and Bangsamoro funds.

“Metro Manila is not the Philippines,” Singson said.

For 2013-2016, the government has lined up 952 projects with total investment requirements of P2.06 trillion or $46.69 billion.

The Aquino administration plans to hike infrastructure spending to 5 percent of gross domestic product by 2016. At present, infrastructure spending stands at only 2.2 percent of GDP.

The current regime of low interest rates and predictable inflation, among others, are elements that will support funding for infrastructure project, thus, sustaining the economy’s higher growth trajectory, said Bangko Sentral ng Pilipinas Deputy Governor Diwa Gunigundo.

"We have been able to institutionalize many of these initiatives to make sure the macroeconomy is conducive to sustaining the conditions that will help provide funding and confidence in favor of promoting infrastructure," Gunigundo said.

With better infrastructure, the Philippines can unlock its full potential, allowing corporates to grow by an average rate of 15 percent or higher, Moe said.

"If that happens, stock markets will go up," he said.

- Interaksyon

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