OBG talks to Stephen Groff, Vice-President for East Asia, South-east Asia and the Pacific, Asian Development Bank (ADB)

Interview: Stephen Groff

How can improving the Philippines’ resilience to climate change help promote sustainable development? How can one mitigate potential damage?

STEPHEN GROFF: The Philippines ranks highest in the world for vulnerability to tropical cyclones, and third in susceptibility to floods and droughts. The destruction wrought by Typhoon Haiyan grimly illustrates this. Our research suggests that, by 2100, as much as 6% of GDP could be lost annually from climate change if measures are not taken. Enhancing climate resilience is therefore critical to ensuring sustainable development.

The Philippines’ National Climate Change Action Plan for 2011-28 supports sustainable development in seven priority areas: food safety, water sufficiency, ecosystem stability, human security, climate-smart industries, sustainable energy and capacity development. Most Filipinos live in urban or peri-urban areas and along coasts, where climate change-induced losses are especially high. Thus, highest priority should go to building urban and coastal resilience. ADB is supporting the government’s efforts through technical assistance and financing in four areas: mainstreaming climate resilience into development planning; enforcing non-structural measures such as coastal zone management and community-based disaster risk reduction; climate-proofing of transport, irrigation, energy and tourism infrastructure; and rehabilitation of forests in critical watersheds.

How can public–private partnerships (PPPs) strengthen the connectivity and competitiveness of second-tier cities while prioritising social needs?

GROFF: Much private investment is needed to address infrastructure bottlenecks, which are a big constraint on growth. The government recently announced its intention to increase spending on public infrastructure from about 3% of GDP now to 5% in 2016, to bring the Philippines on par with South-east Asia. Though this is a big improvement, the country needs another 2% of GDP in infrastructure investment every year to ensure a high and sustainable growth in the medium term.

There are 16 second-tier cities in the Philippines. Improving connectivity within and between them and their neighbouring local governments, as well as enhancing health, education and social services, are essential to their growth and competitiveness. PPPs, crucially, can enhance second-tier cities’ limited financial resources for public infrastructure. City-level PPPs include projects in public markets, commercial centres, bus terminals, government building construction and management, computerisation of city operations, water supply and sanitation, and electricity generation. Besides freeing up budgets, PPPs can increase cities’ income by opening new revenue streams and boosting tax takes from higher-valued properties near a project’s location.

What sort of economic diversification might tackle high unemployment among the semi-skilled?

GROFF: The Philippine economy has shown solid growth over the last decade, mostly in services. While this sector contributes over half of the country’s total output, it cannot provide jobs for everyone. Business process outsourcing, though growing rapidly, employs only around 2% of the labour force, and has a bias toward skilled workers. Since so much labour is under-used even as the labour force grows, there is an urgent need to create productive jobs by diversifying the economy and steering production towards industry. This will allow the economy to walk on two legs – industry and services – to achieve a more inclusive growth.

Agriculture, too, must industrialise by deploying new machines, improving technology, developing agribusiness and forming new links with global value chains. The farm industry employs a lot of semi-skilled labour and thus is critical to any sustainable and inclusive growth strategy. Investment in infrastructure, especially transport and electricity, is essential for industry to grow. Just as important, though, is the need to improve the investment climate, through reforms that streamline business procedures, strip away red tape, and strengthen contract enforcement and property rights.