CEBU, MARCH 9, 2007 (STAR) By Marianne Go - CEBU – The Philippine government must focus on raising investments and ensuring that the benefits of fiscal reform programs would lead to poverty reduction, World Bank country representative Joachim Von Amsberg said yesterday at the opening of the two-day Philippine Development Forum (PDF) at the Marco Polo Hotel here.

Von Amsberg noted that despite some of the fiscal improvements and reasonable growth rates, the investment rate in the country remains low at under 15 percent.

"This is extraordinarily low and raises the question of sustainability of growth. There are questions why growth has not created more employment and more income, and therefore, more rapid poverty reduction," he said in his opening speech.

The World Bank executive urges the PDF "to translate financial improvements into real investments, jobs, incomes and poverty reduction."

He admitted though that the Philippines is in a different situation than it was two years ago. Inflation, he said, has declined, debt is decreasing and growth has been reasonably stable.

"This year, we are meeting in the "context of a more positive macroeconomic and fiscal environment. However, the full picture is more complex, and of course there are challenges that lie ahead," he said.

The government facilitates policy dialogue among sectors involved in forming the country’s development agenda through the PDF, which evolved from consultative meetings held every 18 months by representatives from the government and international development partners.

The last PDF held in Tagaytay City in March last year drew almost 300 participants. This year’s event, with the theme "Achieving Broad-Based Growth through Sustained Reforms and Higher Investments," was held in Cebu to underscore the economic boom in the south.

In his message to the advocates of Philippine development present at the forum, Finance Secretary Margarito Teves affirmed Von Amsberg’s observation about the favorable economic climate in the country.

He said interest rates slid to their lowest as average inflation fell to a two-year low of 6.2 percent, real gross domestic product (GDP) grew by 5.4 percent and real gross national product (GNP) by 6.2 percent last year.

"This is the first time since the 1970s that the economy has grown at these levels for three consecutive years," Teves noted in his speech read by Trade and Industry Secretary Peter Favila.

The government, he said, is committed to sustaining fiscal and economic reforms that will help bring about broad-based growth. In fact, it will present to its development partners 10 priority infrastructure projects for possible funding or assistance.

The 10 projects, worth P80.681 billion, mostly cover road and rail undertakings for Luzon and Metro Manila and are in the advanced stages of discussions or have gone through the Investment Coordination Committee (ICC).

The 10 projects include the Bicol Emergency Power Restoration Project (P1.115 billion), Angat Water Utilization Improvement Project, Phase 2 (P3.575 billion), Quirino Highway Project (P1.621 billion), Palawan South Road Project (P3.130 billion), North Luzon Expressway Extension Project (P19.350 billion), LRT Line 6 Project, which proposes a southward extension of the LRT Line 1 to Cavite (P35.474 billion), Northrail-Southrail Linkage Project (P4.520 billion), Panguil Bay Bridge Project (P2.670 billion), LRT Line 1 North Extension Project, which closes the MRT-LRT loop (P6.206 billion), and the North Luzon East Expressway Project (P3.013 billion).

RP growth will be sustained – GMA By Paolo Romero And Marianne Go The Philippine Star 03/10/2007

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.

Chief News Editor: Sol Jose Vanzi

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