ADB says power crisis, infra delays can stunt Phl growth

MANILA, Philippines - While the Philippines has emerged as the fastest growing economy in the 10-member Association of Southeast Asian Nations, the Asian Development Bank (ADB) has warned that continued threats of poor power supply and delays in big-ticket infrastructure projects could derail its march forward.

The Philippines is ranked just fifth in Asean in terms of foreign direct investment (FDI) inflows with an annual average of $2.8 billion from 2004 to 2013. It trails Indonesia ($19.9 billion), Malaysia ($9.4 billion), Thailand ($8.6 billion) and Vietnam ($8.4 billion).

The ADB, however, has not changed its 2014 growth forecast for the Philippines at 6.2 percent despite several natural and man-made disasters. Its 6.4 percent gross domestic product (GDP) growth outlook for 2015 is also reinforced by the robust remittance inflows as well as the recovery of export markets such as mainland China and the United States.

It is the Asean leader in remittance inflows with an average of $24.4 billion, and is second best in terms of the quality of its education system.

In a press briefing yesterday, ADB Office of Regional Economic Integration head Iwan J. Aziz also warned that the domestic market can only deal with the Asean economic integration by being more efficient and improve its quality.

Aziz observed that there is a growing inflow of small and medium enterprises (SME) from the major partners of the Asean, such as Japan and China. The SMEs are, in fact, partner-suppliers of major industries such as electronics and automobiles.

“The Japanese SMEs, for example, have and continue to relocate in the Asean due to the more favorable working conditions,” he said.

A large number of Japanese SME partner-suppliers are already positioned in several export processing zone in the Philippines. They source, assemble and supply parts for major industrial firms of developed economies.

Japan trade seems to have dropped, but the real reason is that Japan has already relocated a lot of its business in the Asean. “Thus the trade performance of the Asean are increasing because of these kind of investments,” the ADB official explained.

Major Philippine banks, in fact, have already partnered with Japanese banks focused on their SME markets.

Improving its efficiencies, quality of work and the right investment climate can work in favor of domestic SMEs taking a share of the logistics supply. “The other option is to be waylaid by competition,” the ADB official added.

Aziz pointed out that the Philippines plays a major role in the integration or the Asean economic community (AEC).

Aside from the high quality of its educational system, the Philippines produces a competitive pool of skilled, mobile and young labor. A large chunk is already the leading producer of remittance money that fuel the country’s consumption-led economy.

The ADB’s Asian Economic Integration Monitor report shows that the Philippines registered positive gains in terms of its integration with the rest of Asia.