OFW remittances not enough to avert slowdown
MANILA, Philippines - Remittance flows from overseas Filipino workers (OFWs) will do little to offset the expected weak influx of investments that will weigh on growth next year, the Economist Intelligence Unit (EIU) said in a briefing Thursday.
Economic growth will slow to 4.3% this year from the record high of 7.2% in 2007, and will dip further to 4.2% in 2009, EIU Southeast Asia corporate director Justin Wood told reporters Thursday.
The government had reported a more upbeat growth target at 5.5%-6.4% for this year and 6.1-7.1% for 2009.
"The most important factor holding back growth is the lack of investments. Investments are far too low," Mr. Wood said.
Foreign, domestic and public investments together make up less than 20% of the Philippines’ gross domestic product, whereas the regional average is 30%, he noted.
Foreign direct investments are particularly hard to attract because of the country’s risky and difficult business climate.
A problem of perception
"One of the biggest issues the Philippines faces is perception. Vietnam is able to persuade investors [despite its own shortcomings] while the Philippines has struggled...to create a similar level of belief," Mr. Wood said.
The Trade department’s target of a 12% increase in investments for next year is "a little ambitious," especially since many firms have put expansion projects on hold due to the lack of credit, he added.
The government will need to resolve the conflict in Mindanao, assure a more stable political leadership, and counter perceptions of corruption, Mr. Wood said.
Still, the business process outsourcing (BPO), mining, retail and tourism sectors show promise in attracting investments, he said.
Joe Doering, Asia south sub-region head for Nokia Siemens Networks, the intelligence arm of the telecommunications firm, added that the local information and communication technology sector should be able to post robust growth. "[Telecommunication] operators...have managed to stay profitable...and have contributed 10% to GDP," Mr. Doering said, adding that the figure does not even account for the indirect benefits to the BPO industry.
But the country will have to narrow the so-called digital gap, as many rural households are not yet wired, let alone have access to broadband Internet, Mr. Doering added.
Mr. Wood also recommends that government improve revenue generation, particularly the collection of taxes, to increase government spending’s contribution to economic growth.
For now, growth is driven by private consumption on the back of OFW remittances.
"It looks like we’re in for another decent performance of OFW remittances," Mr. Wood said, noting that banks he had talked to had observed strong remittances to the Philippines despite the global slowdown. — Jessica Anne D. Hermosa, BusinessWorld
Economic growth will slow to 4.3% this year from the record high of 7.2% in 2007, and will dip further to 4.2% in 2009, EIU Southeast Asia corporate director Justin Wood told reporters Thursday.
The government had reported a more upbeat growth target at 5.5%-6.4% for this year and 6.1-7.1% for 2009.
"The most important factor holding back growth is the lack of investments. Investments are far too low," Mr. Wood said.
Foreign, domestic and public investments together make up less than 20% of the Philippines’ gross domestic product, whereas the regional average is 30%, he noted.
Foreign direct investments are particularly hard to attract because of the country’s risky and difficult business climate.
A problem of perception
"One of the biggest issues the Philippines faces is perception. Vietnam is able to persuade investors [despite its own shortcomings] while the Philippines has struggled...to create a similar level of belief," Mr. Wood said.
The Trade department’s target of a 12% increase in investments for next year is "a little ambitious," especially since many firms have put expansion projects on hold due to the lack of credit, he added.
The government will need to resolve the conflict in Mindanao, assure a more stable political leadership, and counter perceptions of corruption, Mr. Wood said.
Still, the business process outsourcing (BPO), mining, retail and tourism sectors show promise in attracting investments, he said.
Joe Doering, Asia south sub-region head for Nokia Siemens Networks, the intelligence arm of the telecommunications firm, added that the local information and communication technology sector should be able to post robust growth. "[Telecommunication] operators...have managed to stay profitable...and have contributed 10% to GDP," Mr. Doering said, adding that the figure does not even account for the indirect benefits to the BPO industry.
But the country will have to narrow the so-called digital gap, as many rural households are not yet wired, let alone have access to broadband Internet, Mr. Doering added.
Mr. Wood also recommends that government improve revenue generation, particularly the collection of taxes, to increase government spending’s contribution to economic growth.
For now, growth is driven by private consumption on the back of OFW remittances.
"It looks like we’re in for another decent performance of OFW remittances," Mr. Wood said, noting that banks he had talked to had observed strong remittances to the Philippines despite the global slowdown. — Jessica Anne D. Hermosa, BusinessWorld
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