"Improve the banking system to ensure that capital flows to the most productive uses, including dynamic, high tech firms," Robert Vance Pulley, World Bank country director for the Philippines, said.
Pulley’s observations form part of a World Bank report covering East Asia and the Pacific. The report contains recommendations for the recovery of the region.
According to the World Bank, the country should strengthen corporate management through legal and financial institutions that shore up shareholder and property rights. It also calls for a review of education programs and policies to foster analytical skills and aptitude for innovation.
Particular attention was placed on the importance of formulating policies that would spur the growth of information and communications technology (ICT) considered critical for the country’s march towards "a highly innovative economy."
The report stated that for the region to "return to a position of global competitive eminence" it should focus on four key areas: building innovative capability, strengthening market institutions and business services, harnessing information and communications technologies to the fullest; and promoting openess.
Dr. Shahid Yusuf, one of the authors of the report, said innovation rather than capital and labor is and should be the main driver of the 21st century.
"The most dynamic countries will be those best able to mobilize the power of technology, although building innovative capability is a daunting task," he said.
The East Asia region, which includes the Philippines, is considered a strong contender for economic prominence. The region has an adequate supply of resources, manufacturing skills, educational and research infrastructure as well as a base of financial and business services.
"Now they need to go the extra mile and become highly innovative economies," the author added.
The World Bank report also calls for further expansion of the services sector which is said to be lagging behind the rest of the world.
"A strong services sector facilitates industrial development," the report stated, adding that the most commercially viable nations are in the intersection of services and manufacturing activities.
Yusuf added: "The future dynamism of services depends on policy reforms that stimulate competition, enhance the quality of regulation, and deepen technical and managerial skills."