OBG talks to Florencio Abad, Secretary, Department of Budget and Management

Interview: Florencio Abad

With limited resources to hand, which areas should the Philippines prioritise in terms of funding?

FLORENCIO ABAD: The current administration is targeting substantial investments in social services and programmes to ensure all economic growth is inclusive. We are making an unprecedented investment in basic education, with one of the main goals to close the so-called classroom gap, currently at about 65,000 rooms, by 2014. We believe investment in teachers, classrooms, books and the welfare of students should dramatically increase the achievements and capabilities of the nation’s youth.

The administration is also focusing on public health, with plans to cover all of the nation’s 5.3m households with the national health insurance programme by the end of 2012. Within this focus, we are now examining the feasibility of public-private partnerships (PPPs) for the rehabilitation and maintenance of our medical centres. Further resources will be allocated towards additional support mechanisms for the most vulnerable in society, including the provision of affordable housing.

Ultimately, however, it is essential the country’s citizens have access to high-quality, sustainable jobs. The president’s administration is focusing on the development of five key industries: business process outsourcing, electronics, tourism, agriculture and infrastructure investment. By directing its efforts to support the growth of these five industries, the administration’s efforts should have substantial impact.

How can private investors and funds help lead the Philippines towards economic growth?

ABAD: If you look at the reasons why private sector investment has been slow to come into the Philippines in the past, the overarching cause was political instability. Other factors included corruption, the high cost of doing business, red tape and the country’s poor infrastructure. By increasing efforts to streamline bureaucracy, to provide consistent and predictable policies, and to support a level playing field, the country should see increased private sector investment in coming years. PPPs will be a significant vehicle for private sector investment as well. It is clear the private sector has many capabilities and capacity that the government does not. Yet given issues in the past with previously contracted bilateral projects, the current administration must ensure future projects adopt a more sustainable and open model for development. While this may lead to a temporary slowdown in the development of PPP projects, these efforts should lay the foundations for more rapid economic growth in the long term.

How can corruption be combated in the country?

ABAD: Discouraging corruption and graft has been a focus of this administration since taking office. Still, citizens have been quite clear that, while good governance is a noble goal, unless it is translated into rapid and beneficial growth for the population, it is not enough.

To this end, the country’s leadership must ensure the government is transparent, accountable and participatory, which is the only method by which the Philippines can even begin to combat corruption. Along the same lines, it is important the government can show concrete and tangible results. It is widely known there is a strong correlation between corruption and poverty. By working to reform the encompassing and deeply embedded culture of political patronage from the past, the country can start to undermine corruption at its source. Thus, apart from traditional investments in poverty reduction and social welfare programmes, it is essential efforts include empowerment and involvement of the population. Indeed, inclusive growth means poverty reduction, but it also means supporting the nation’s people to be active participants in economic and social development. By encouraging and empowering Filipinos, the government can decrease the relevance of the support structure provided by the state.

Hopefully, this will eventually lead to an increased reliance on merit, the free market, competition and openness. Taken together, these qualities can make the Philippines more than just an emerging country.