As policymakers and business leaders gather in Manila this week for the World Economic Forum on East Asia, the talk will inevitably turn to growth.
Sustaining economic growth has become harder for Asian policymakers as interest rates in the developed world rise on 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. To see how reforms can change perception and reality, one may look at the Philippines.
Since assuming office in 2010, President Aquino has turned around a country from being “the sick man of Asia” to an economic comeback story. He undertook reforms that economists have been urging and politicians shirking (from). These include the Sin Tax Law that raised the levy on alcohol and tobacco products, and spurred the revamp of commonplace procedures.
Our reforms have been rewarded.
Rating upgrade
Gross domestic product grew by 7.2 percent in 2013, the fastest in the Asean (Association of Southeast Asian Nations) region, notwithstanding natural calamities, including Super Typhoon Yolanda (international name: Haiyan) that is said to be one of the strongest ever recorded.
Moreover, the Philippines received investment grades 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 this month from S&P, which showed the reforms will endure beyond President Aquino’s term.
A powerful force
Our efforts have boosted the country’s ranks in global surveys. Its rank jumped 26 places in the World Economic Forum’s Global Competitiveness Index since 2010, and 30 places in the International Finance Corp.’s Doing Business Index in 2013.
Despite our gains, much remains to be done both at the national and Asean levels. In the remaining years of our term, the Aquino administration will intensify efforts at reform by opening up more sectors to foreign investments, rationalizing tax incentives and institutionalizing transparency.
Those who doubt our commitment should take note of the unpopular enactment of the reproductive health bill and the amendment of the Sin Tax Law.
Across Asean, we must integrate our economies in a way that simplifies rules and lowers 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 those, growth is fleeting. For too long, many politicians have avoided unpopular reforms. But our citizens deserve better.
Reward for telling truth
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 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.
(Editor’s Note: Cesar V. Purisima is the finance secretary of the Philippines. Manila is hosting the World Economic Forum on East Asia from May 21 to 23).