As policy-makers and business leaders gather in Manila for the World Economic Forum on East Asia, talk will inevitably turn to growth.
Sustaining economic growth has become harder for Asian policy-makers, as interest rates in the developed world have started to rise following signs of recovery. After years of easy credit, emerging markets will have to compete for funds to fuel development, and woo investors with fundamentals and structural reforms.
Reforms have the power to alter a country’s economic destiny. This is why they inspire confidence from markets, businesses and citizens. The Philippines provides an example of how reforms can change perception and reality.
Since assuming office in 2010, President Benigno Aquino III has transformed the country from being “the sick man of Asia” to an economic success. He undertook reforms that economists have been urging and politicians shirking. These include the Sin Tax Law, which increased taxes on alcohol and tobacco products, and the revamping of commonplace procedures.
Our reforms have been rewarded. Gross domestic product grew by 7.2% in 2013, the fastest in the ASEAN region, despite natural disasters, including Typhoon Haiyan, one of the most powerful storms ever recorded.
Moreover, the Philippines received investment grade ratings from Fitch, Standard & Poor’s and Moody’s in 2013, lowering the country’s borrowing costs and allowing us to redirect funds for social services and infrastructure. The Philippines earned another rating upgrade in May 2014 from Standard & Poor’s, proof that the reforms will continue beyond President Aquino’s term.
Our efforts have boosted the country’s ranks in global surveys. It has jumped up 26 places in the World Economic Forum’s Global Competitiveness Index since 2010, and 30 places in the World Bank’s and the International Finance Corporation’s Doing Business Index in 2013.
While all of this is impressive, much remains to be done both at the national and ASEAN levels. In the three remaining years of our term, the Aquino administration will intensify efforts at reform by opening up more sectors to foreign investment, rationalizing tax incentives and institutionalizing transparency. Those who doubt our commitment should take note of the enactment of the Responsible Parenthood and Reproductive Health Act and the amendment of the Sin Tax Law.
Across the ASEAN region, we must integrate our economies so as to simplify rules and lower the cost of doing business. With our young populations and growing economies, we have the potential to become a powerful force for liberalization. However, we need reforms.
Without reforms, growth will be short-lived. For too long, many politicians have avoided unpopular reforms. But our citizens deserve better. The Aquino administration’s electoral success and approval ratings are proof that voters listen to, and reward, politicians who tell the truth. This is as true in the rest of the ASEAN region as it is in the Philippines.
The good news is that reforms are not rocket science. We are well aware what needs to be done. Good governance is good economics. Just look at the Philippines.
Author: Cesar V. Purisima, Secretary of Finance, Philippines
Image: A man rests at a dock in Manila Bay March 28, 2009. REUTERS/John Javellana