By Justine Irish D. Tabile, Senior Reporter
THE PHILIPPINES’ ambition to change into Southeast Asia’s next economic growth engine is determined by the private sector’s ability to take a position, expand and innovate with confidence, the World Bank (WB) said.
The message today is that this: higher jobs and prosperity for Filipinos require higher conditions for firms to take a position, grow, upgrade and change into ASEAN’s (Association of Southeast Asian Nations) next growth engine,” Zafer Mustafaoğlu, World Bank country director for the Philippines, told the BusinessWorld Economic Forum on Monday.
He warned that the US-Israel war on Iran, which has pushed up oil prices, is slowing economic activity and lifting inflation pressures.
The Philippine economy grew by a weaker-than-expected 2.8% in the primary quarter, as surging oil prices and the lingering fallout from past domestic scandals weighed on activity.
Inflation accelerated to 7.2% in April, above the Philippine central bank’s forecast and goal for a second straight month.
Mr. Mustafaoğlu in his keynote said investment weakness is the important thing concern since it signals fewer expansions, upgrades and productivity improvements that ultimately limit job creation.
Gross capital formation contracted 3.3% in the primary quarter, reversing a 4.5% gain a yr earlier but improving from the previous quarter’s decline.
BusinessWorld President and Chief Executive Officer Miguel G. Belmonte said the Philippines’ ASEAN chairmanship highlights each opportunity and the necessity to handle domestic competitiveness gaps.
“ASEAN has no shortage of frameworks and roadmaps, from economic blueprints to sector-specific agreements,” he told the forum. “The region has outlined its vision to change into considered one of the world’s biggest economic blocs by the top of the last decade.”
He said ASEAN integration goals are well defined, however the Philippines must fix infrastructure bottlenecks and productivity constraints to learn fully.
Jamil Paolo S. Francisco, executive director of the Asian Institute of Management – Rizalino S. Navarro Center for Competitiveness, said the Philippines has stagnated in global rankings despite earlier gains.
He said productivity gaps remain wide, with the country producing significantly less output per employee compared with regional peers reminiscent of Thailand.
“Competitiveness could be tricky since it’s a race,” he identified. “Development is a marathon, not a sprint. But here’s the thing — on this marathon, we’re getting left behind.”
Anthony Oundjian, Boston Consulting Group Philippines managing director, said the Philippines lags behind its ASEAN peers by way of output.
“Though we have now the demographics and the buyer market, we actually lack scale in productivity per employee,” he said. “We’re at around one-fourth of Thailand’s productivity per employee.”
He added that predictability in policy implementation is critical for long-term investment decisions.
Grab Philippines Managing Director Ronald Roda said fragmented local requirements slow business expansion across cities and municipalities nationwide.
Mr. Mustafaoğlu said the Philippines could still attract more foreign investment and move up the synthetic intelligence (AI) value chain if reforms speed up.
He said delays in permits, port congestion and complicated paperwork proceed to boost costs and discourage firms from expanding.
He urged reforms in business registration, border management and trade agreements to enhance competitiveness and reduce transaction costs.
He said business registration within the Philippines takes about 78 days versus at some point in Singapore and two in Malaysia.
He also said inefficient border processes act like a hidden tariff that raises costs and slows global supply chain integration.
He added that maximizing free trade agreements could boost productivity through cheaper inputs and stronger competition.
“The country already has a foothold,” Mr. Mustafaoğlu said. “Through semiconductors and intermediate inputs, the Philippines is already connected to the hardware side of AI. However the country isn’t yet capturing the total opportunity.”
He said the Philippines must move beyond assembly operations into higher value-added activities reminiscent of design support, testing and AI-enabled services to stay competitive within the region.