SECRETARY ARSENIO M. BALISACAN
Secretary of Socioeconomic Planning and
Laguna Technopark Induction Ceremony
Multi-Purpose Pavilion Hall, Laguna Technopark
Sta. Rosa, Laguna
07 August 2015, 10.00 a.m.
Ladies and gentlemen, members of the Laguna Technopark Association, and representatives of the locator firms, good morning, and congratulations to the newly elected members of the Association’s Board of Governors!
I would like to thank the Association for inviting me to take part in this event which provides a platform to highlight the role of the industry sector (to which many of you belong) in the development of the region and the country.
As you know, the Philippines has emerged as one of the fastest-growing economies in Asia in recent years. With an average growth rate of 6.2% per year from 2010 to 2014, the Philippine economy is now traversing a higher growth path. The average growth in the past five years was, in fact, the highest in nearly four decades. This growth has been supported by sound and stable economic fundamentals, characterized by low and stable inflation, a robust financial sector, prudent fiscal management, and a healthy external position that has made our economy much more robust and less vulnerable to global volatilities. For example, our current account surplus has been accompanied by resilient remittances from Filipinos overseas, generally robust merchandise exports, strong business process outsourcing (or BPO) earnings, and rising tourism receipts.
More importantly, the fundamental sources and drivers of our recent economic growth are changing. In particular, we are observing the growing importance of investment spending (capital formation) on the demand side and the resurgence of industry, especially manufacturing, on the supply side. Manufactured exports have not only grown despite global trade slowdown but also diversified beyond electronics and semiconductors. About 10 years ago, electronics and semiconductors represented about 70 percent of our total merchandise exports; today, this sector accounts for just about 42 percent. This development has reduced the vulnerability of the economy from shocks in a region of the world or from a major trading partner. For example, when the EU or Japan catches cold, our economy, particularly the industrial sector, remains healthy and robust, largely protected from developing or catching full-blown cold.
The overall optimism in the Philippine economy in recent times is also at an all-time high. The country’s strong macroeconomic indicators, stable political landscape, and timely governance reforms restored the confidence of our people and investors. This has, in turn, been reflected in remarkable improvements in our Global Competitiveness and Ease of Doing Business rankings as well as our investment grade ratings. Indeed, our economic gains serve as evidence that the Philippines is finally catching up with its neighbors, and that we are heading towards rapid, sustainable, and inclusive growth and development.
The ASEAN integration, which is set to culminate in a few months’ time, is also expected to boost the Philippine industry, particularly manufacturing, as the country continues to attract foreign investors, especially given its increasing attractiveness as an investment destination in the region.
Without a doubt, this is a great time for the Philippine economy, particularly the industrial sector, including logistics. However, while opportunities abound and growth prospects in the sector are very encouraging, there remains a number of major challenges that we need to aggressively address in order to maximize the sector’s full potential. To be sure, we must continue pursuing market reforms to further sharpen the competitiveness of Philippine-based industries and reap the benefits of ASEAN economic integration.
Some of the critical constraints that need immediate action are the country’s weak public infrastructure and regulatory environment. For one, while infrastructure spending as a percent of GDP has been increasing in recent years, there is a constant need for the infrastructure system to keep up with rising demands in our fast-growing economy, especially these days as new property investments flood the market. Poor public transportation and congestion in our roads, ports, airports, and seaports threaten to hamper the pace of economic activity and cap the growth of many major cities if left unaddressed. For this reason, the government is already devoting greater focus on infrastructure investment and putting into place comprehensive transport roadmaps and critical logistics infrastructure roadmaps to keep up with the significant growth of the country’s primary business hubs.
Another critical area of policy reform concerns economic regulation, including restrictive ownership rules. Investors generally look for credible, stable law and regulation surrounding investment. In some cases, however, the legislation is weak or not even in place to protect investors. As a result, investors face high transaction costs, petty corruption and red tape, and substandard regulatory practices. At the same time, strict restrictions on foreign ownership could also hamper the growth of foreign direct investments in the country. Towards this end, the government is striving to improve transaction processes as well as legal and regulatory environments. These include, for example, liberalization of contractors’ licensing and registration, promotion and development of domestic and overseas construction, and the efficient implementation of dispute resolution mechanisms.
We also need to pursue a number of other important legislative measures that will further reduce the cost of doing business in the country. For instance, the passage of the Competition Law last July 21 will undoubtedly help diffuse market power and concentration in a spectrum of key industries, including manufacturing and logistics.
Reforming the tax system and raising tax efforts to levels at par with our regional peers is also crucial to sustaining fast-paced growth and public infrastructure development. Some areas that need further institutional reform include: improving the tax effort among the self-employed and corporations; curbing smuggling; improving the regulatory regime for SMEs and PPP projects; and rationalizing fiscal incentives.
The challenges to continuing the implementation of business-friendly governance and policy reforms are many, though not daunting, even as we face the transition to a new government in less than a year’s time. But we remain optimistic as we count on the private sector, such as the Association’s locators, to contribute significantly to the industry’s growth and to continue to support governance and economic reforms. The government recognizes the value of attracting and sustaining private investments, and nurturing prospects for the industry sector. We are thus pursuing reforms and programs to enhance the business environment in the country. These include, for example, the Comprehensive Automotive Resurgence Strategy or CARS Program, which will help revitalize the country’s automotive industry, and the newly enacted Philippine Competition Law and the Amendment to the Cabotage Law that will level the business playing field. Importantly, we are also pushing for initiatives that are responsive to the challenges of the ASEAN integration that offers opportunities for growth and job generation. With these, we hope to streghten private sector-led growth and deepen inclusive development in the country.
The Laguna Technopark has already flourished in the past 25 years. From 224-hectare site to more than 387 hectares now, and from single-digit firms to more than a hundred locator firms, indeed Laguna Technopark has gone a long way since its initial venture in 1989. To the newly elected members of the Board of Governors, I encourage you to be a major player in the rise of the Philippine economy and take advantage of all the opportunities offered by the ASEAN integration, innovate and make use of technology-efficient and climate-smart products, and maintain competitiveness in the sector. Your success will yield great returns not just to your respective companies but to our economy and our labor force. Know that ultimately, your success will be a significant contribution to our collective efforts at promoting inclusive growth and reducing poverty.
Thank you all. Mabuhay tayong lahat!