For better growth prospects, the percentage of a country’s productive capacity devoted to production type goods and services should be significantly higher than one-third.
The wide assortment of things on top of the office tables of the Independent Commission on Infrastructure (ICI) – mounds of pleadings, open books, geodesic maps, magnifying glasses and copies of land titles – points to the fact that at the center of the activities of ICI and associated entities is the restoration of public trust in the government’s infrastructure program.
The series of scandals that have been unearthed in recent months have left the Filipino people with very little trust in the program; may, there may be no trust left.
Lost amid the shuffle of political cards and observances of legal niceties has been the economic equation that determines the rate of growth and quality of development. I’m referring to the equation Investment + Consumption = Gross Domestic Product (GDP).
Stated differently, a part of this country’s nominal 2025 GDP of P28.5 trillion is accounted for by production resulting from investments of Filipinos, while the rest is generated by consumption. The Philippine Statistics Authority (PSA) tells us that two-thirds of the Philippines’ GDP is attributable to consumption of goods and services.
It is a fixture of economic development theory that an economy is bound to develop with greater speed and more robustness, with the greater percentage of its GDP devoted to production instead of consumption; to that end international development institutions like its World Bank and private-sector economists constantly urge developing countries to put in place policies that encourage the saving that must precedes investment.
They support this view with the argument that productive activity deepens and broadness the development of an economy, generates more and higher-quality jobs and is more conducive to external financial stability.
To be sure, a country’s people have to be provided with food, services and other consumption-type products: but for better growth prospects the percentage of a country’s productive capacity devoted to production type goods and services should be significantly higher than one-third.
The current scandal associated with flood control projects is very important from many governance-related stand points. But it is extremely important from the stand point of the GDP equation discussed above. Every analysis of this country’s persistent inability to attract a high volume of foreign direct investments (FDI) cites the Philippines’ inadequate infrastructure in transportation, communication, manufacturing, power generation and other major infrastructure-sectors domains.
The current scandal, by laying bare the extent and depth of the Philippines’ infrastructure problem, will render more difficult the attainment of a higher inflow of FDI.
For this reason, this gaping hole in this country’s governance structure needs to be quickly and permanently sealed. (llagasjessa@yahoo.com)
