A prominent economist said only an improved and innovative public sector will bridge the gap and reduce inequality for inclusive growth.
Dr. Charlotte Justine Diokno-Sicat, research fellow at the Philippine Institute for Development Studies (PIDS) and president of the Philippine Economic Society (PES), underscored this in her paper “Promoting an Investment-Driven Economy Through Good Governance.”
Sicat said the reform would involve fiscal consolidation and strategic investments in physical and human capital.
Sicat’s paper was launched during a virtual town hall discussion held March 31, organized by think-tank Stratbase ADR Institute.
She said there should be no policy reversals nor any major institutional disruptions that would affect revenue raising or spending capacity of the national government.
“There is a need for prudent and strategic spending to pump prime the economy to outgrow debt, given that the public debt ratio has increased from 39.6 percent in 2019 to 60.5 percent in 2021,” she said.
According to Sicat, policy makers would still be managing the now-endemic COVID-19 while trying to sustain the 5.3 percent economic recovery of 2021 from the economic contraction of 9.5 percent in 2020.”
“Government should continue to invest in both human capital and infrastructure but strategically so because of the need for fiscal consolidation,” she stated.
The strategic capital investments will encourage private sector participation at all levels, she added.
“The largest fiscal multipliers are in infrastructure which, in the short-term, increases income but long-term encourages more business investments and tourism. The 2022 allocation for infrastructure and capital outlays is 5.7 percent of GDP, far from the 6.7 percent in 2017 but higher than 2021. These prioritizations should be continued to jumpstart the economy.”
“There is a need for institutional innovations which cut across the public sector such as investments in data and information systems and harnessing digitalization,” Sicat said.
“The lack of capabilities and access to ICT instruments cause a digital divide, which is a gap between socio-demographics with access to ICT. E-government solutions will lead to social exclusion if these issues remain unaddressed. Harnessing digitalization requires a whole-of-society approach and provides a major role for the private sector contribute to/participate in to sustain economic recovery,” she noted.
“This requires laying the foundation in infrastructure and systems, investments in human capital, financial sector, and private sector as partners.”
“LGUs should contribute to economic recovery by strategically utilizing the adjustment in their intergovernmental fiscal transfers owing to the Mandanas ruling by: Strengthened development planning and investment programming; Enhancing local revenue mobilization; Looking for alternative arrangements (inter-local or with the private sector)
for providing devolved goods and services,” the study said.
In his remarks during the forum, Prof. Victor Andres “Dindo” Manhit, president of Stratbase ADR Institute, said a multi-stakeholder strategy was needed to address inequality.
“We need public-private partnerships, investments by the private sector, and a better environment for investment by the incoming administration by June 30, 2022, with the hope that it can provide jobs, livelihood and income, and a comfortable life for many Filipinos in the long run.”
The government can only create that environment, but it is the private sector that can create jobs, he added.
These endeavors trigger a domino effect by creating jobs, providing income security, and spurring consumption and real growth. Indeed, at this point in time, sustainable strategies must be pursued, where the future generations can reap the long-term benefits.
There is a caveat, though, to attract more investments to the country, the next government must uphold the rule of law, promote good governance, strengthen efforts in transparency and accountability, and spearhead political and economic reforms.
“When prospective foreign investors see that even domestic players show positive response to government initiatives, then they too will join in the pursuit for honest and collective growth,” he said.
Other speakers in the virtual discussion were Dr. Ronald Mendoza, Dean of the Ateneo School of Government, Dr. Carlos Primo David, Trustee & Program Convenor, Stratbase ADR Institute and Convenor, Philippine Business for Environmental Stewardship (PBEST), Mr. Christopher Tan, Chief Operating Officer, PHINMA Education and Board Member, Philippine Association of Colleges and Universities, and Mr. Francisco del Rosario Jr., chairman of the Institute for Solidarity in Asia.