RP growth will be sustained – GMA

CEBU — President Arroyo vowed yesterday to make the country’s economic gains sustainable in the face of possible internal and external shocks.

Mrs. Arroyo made the commitment before the international donor community, which voiced continued support for the country as well as concerns over weak areas in governance and fiscal management.

"This year we hope to demonstrate the sustainability of reforms just as we strengthen our defenses to lessen vulnerabilities to external and internal shocks," Mrs. Arroyo said in a speech at the closing of the 2007 Philippine Development Forum at the Marco Polo Hotel here.

She was reacting to the closing statement of World Bank country director Joachim von Amsberg that government’s fiscal reforms have created a "window of opportunity" for the Arroyo administration to translate the financial gains to more jobs and investments.

"Joachim is right in saying that there is much, much more room for investments to grow to have a strong impact on alleviating poverty," she said.

"We are on the same track every single day, working with our team to cut the red tape, build the digital and physical infrastructure as well as a strong energy grid nationwide, and you’re right about our next legislation to rationalize the incentives to pull in massive investment to create jobs and beat poverty," she said. The bill rationalizing fiscal incentives is still pending in Congress.

"We are optimistic about the future of the nation and the well-being of the people. The national agenda, as you all had heard, is designed to move the nation forward toward greater political stability, economic prosperity, peace and order," Mrs. Arroyo said.

She stressed that, "bringing the benefits of a strong economy to every Filipino in every service is the focus of the national agenda."

She said solid economic indicators give the Philippines a fighting chance to achieve at least a seven percent growth rate toward 2010.

One of the favorable indicators is the 27.5-percent increase in export despite the peso appreciation, she said.

"We aim to buttress confidence even more by a unifying leadership, building enterprise and political stability at all levels," Mrs. Arroyo said.

Von Amsberg said the forum acknowledged last year’s major progress in fiscal management, including the implementation of the Expanded Value Added Tax (EVAT) in 2006, but advised the government to go slow on fiscal incentives and concentrate instead on macro-economic stability, enforcing the rule of law, strengthening the regulatory framework and reducing red tape.

He said he believed investments "would still come in with less incentives as long as those other factors are in place."

"There is an over-reliance on the grant of incentives to attract investments into the country," he told The STAR.

"The ongoing turnaround in public finance has opened a credible path to fiscal sustainability," he stressed.

He said the benefits of fiscal reforms are clearly apparent from the lower interest costs and borrowing spreads, stronger financial markets, lower inflation, and higher foreign direct investment.

While urging the government to continue fiscal reforms and improve competitiveness, Von Amsberg maintained that "fiscal consolidation be based on increasing revenues since further expenditure compression is neither desirable nor sustainable."

Von Amsberg told The STAR that with its success in stabilizing its fiscal position, the government can now afford higher non-interest expenditures and that it should now focus on raising more taxes.

The World Bank official also highlighted the need for the country to improve its competitiveness by setting up high-quality infrastructure through more private investments. In addition, the country should lower the cost of doing business and allow more competition in protected sectors.

"The lack of effective competition hurts consumers and small and medium enterprises and discourages entry and investment by domestic start-ups and foreign investors," he said.

The PDF identified civil air transport, ports and shipping, and cement production as areas with substantial potential for reducing costs by allowing increased effective competition, Von Amsberg said.

He also stressed the "critical" need for a more vibrant agriculture, and a more focused land use administration and distribution.

Agriculture Secretary Arthur Yap said his department is implementing a more focused and strategic investment program.

To support DA’s programs are the Department of Public Works and Highways and the Philippine Ports Authority, he said.

The DA and the Department of Trade and Industry, Yap said, are also working together to expand domestic and international market access for agriculture and fishery products.