World Bank urges Philippines to pursue more reforms

MANILA, Philippines - The World Bank is urging the Philippines to implement further reforms to enhance competition in the economy and revitalize job-creating sectors.

“Increasing competition in the economy, coupled by more investments in infrastructure, could reinvigorate the agriculture and manufacturing sectors, and create more and better jobs,” said the Washington-based lender in a recent report.

It said strengthening the comprehensive competition policy would level the playing field and lower prices.

“An explicit competition policy is needed to combat ongoing and potential anticompetitive practices that are not sanctioned under the existing legal framework. The principle of fair competition needs to be at the heart of this policy,” the report said.

To achieve this, the WB report said the principles and key provisions for a fair competition policy can be established through an EO in the short term. In the medium-term, an explicit anti-trust and fair trade law could be enacted.

It also underscored the need for a strong and independent competition authority to enforce this policy.

The World Bank said it is imperative that such office have statutory independence, be adequately funded and fiscally autonomous, and be led by senior executives who are appointed for fixed terms.

“Without an institutional structure in place to implement and coordinate the reform process, there is a danger that any reform momentum to enhance competition might quickly dissipate,” it stressed.

The report said the creation of the Office for Competition in the Department of Justice to investigate monopolistic behavior is a “step in the right direction.”

It said the country thus should strengthen this office through legislation.

In December 2014, the Senate passed a fair competition bill. The House version is currently being debated.

The World Bank report said more reforms need to be pursued to open the economy further to foreign competition; enhance competition in key sectors with strong potential to reduce poverty such as ports, shipping, water utility, airlines, oil, cement, chemicals, and agriculture; and strengthening regulatory capacity.

In addition to enhancing domestic competition, the World Bank said allowing more foreign participation would facilitate the entry of technology and innovation that can help the country become more competitive.

While the Philippines’ ownership rules are not excessively restrictive relative to those of other countries in the region, the report stressed its slower growth record over the past decades indicates that it needs to position itself ahead of the regional norm.

“Opening up the economy to more foreign participation is one way of speeding up growth, given the benefits that come with more FDI (foreign direct investments),” it said.

The WB report said having more contestable markets can spur investments from both domestic and foreign sources and bring down the cost of manufacturing inputs and logistics.

These also provide workers in agriculture and informal services with better jobs in manufacturing and high skill services, and increase real household income by reducing consumer prices, it added.