EDITORIAL - Growth, but not enough

The country director of the World Bank said what’s on the mind of people when presented with positive Philippine economic figures: Why isn’t economic growth translating into more jobs and therefore higher income and poverty reduction?

The World Bank’s Joachim von Amsberg pointed to one of the reasons: investments in this country, he said, are "extraordinarily" low. Though Von Amsberg lauded recent fiscal reforms, he said the lack of job-generating investments raised questions about the sustainability of economic growth. Yesterday, at the end of an economic forum in Cebu, he said the country relied too much on tax breaks and similar incentives to attract investments. What the country needs, he said, is to work on macroeconomic factors and create a favorable investment climate through macroeconomic stability, a strong regulatory framework, the rule of law, less red tape – all the factors that foreign businessmen have long sought in this country.

President Arroyo, who also spoke at the closing of the forum, vowed to make economic gains sustainable. She said her administration is cutting red tape, building the digital and physical infrastructure needed for investments, and working on legislation to rationalize fiscal incentives for investors.

The World Bank official is not the only one who has lauded the country’s fiscal reforms but expressed concern about the sustainability of economic growth. And he is not the only one who has noticed that economic gains are not translating into poverty reduction. Even the administration’s economic team has admitted that more work is needed for the country’s poor to feel the trickle-down effect.

Reforms averted a looming fiscal crisis and pleased international credit rating agencies. But for the kind of economic growth that can be sustained and can keep up with population growth, the government will need to work on the factors that have eluded this country even after democracy was restored: the rule of law, a strong regulatory environment, transparency and predictable investment policies. Until those factors are in place, the country will have growth, but not enough to make a difference in the lives of the masses.