1. Successes and challenges in implementing structural reform The case of the Philippines Arsenio M. Balisacan, PhD Secretary of Socioeconomic Planning Republic of the Philippines 02 February 2015, Clark, Philippines

2. Key messages The Philippines has been implementing structural reform: Good governance + good economics It has yielded for us quite good results But the task is far from complete. International cooperation can facilitate the process of deepening structural reform. 2

3. The Philippine context: Late 80s to early 90s The Philippines embarked on significant structural reforms Breaking up of monopolies in selected industries (telecoms, airline, water and power utilities) Deregulation of the oil industry Establishment of an independent monetary authority Liberalization of the banking sector Tariff reform and import liberalization 3

4. Philippine context: Focus of Aquino administration is to address the key constraints to growth and its weak translation to people’s wellbeing. Massive investment in infrastructure and human capital development Effective regulatory systems and strong regulatory capacity Peace and human security, especially in Mindanao Disaster preparedness and management, social protection Credible institutions, Good governance 4

5. Our strategies are aligned with ANSSR Five Pillars More open, well-functioning, transparent and competitive markets Better functioning and effectively regulated financial markets Labor market opportunities, training and education Sustained SME development and enhanced opportunities for women and for vulnerable populations Effective and sustainable social safety net programs 5

6. Recent reforms have yielded positive results. Broadly, reforms have been evidence-based, focused on the most binding constraints to growth. Strong governance and anti-corruption agenda Restored confidence Game plan for competitiveness Rise in Global Competitiveness and Ease of Doing Business rankings Further opening up of sectors Growth in tourism and services; resurgence of manufacturing Sound fiscal management and PPPs Higher spending for human capital investment (education, training, health, CCT) and infrastructure 6

7. The Philippines is no longer the “sick man” of Asia. 7 Source: WB

8. The Philippine economy is on a higher growth trajectory since the beginning of the current decade. Average growth in 2010-2014 is the highest 5-year average growth since the mid-1970s. Real GDP growth 6.3% (2010-2014) 6.1% (2014) 7.2% (2013) 6.8% (2012) Source: PSA Structural break of potential real GDP at around 2009 8

9. The shift in the growth trajectory has come alongside structural transformation. Services sector has expanded while the share of the agriculture and industry sectors in GDP decline. 9

10. Employment share of agriculture has been decreasing; share of services substantially increasing; but increase in share of industry has been marginal. 10

11. Lessons learned: 1. Sustaining growth and making it inclusive requires good governance and sound economic policies and strategies. But the task is far from complete. 11 GOOD GROWTH Rapid, Sustained, and Inclusive GOOD GOVERNANCE GOOD ECONOMICS

12. Source: Philippine Statistics Authority Employment and poverty have become more responsive to growth, but still need to be improved. Poverty Statistics*, First Semester (%) *using national poverty line 12

13. Lessons learned: 2. Piece-meal approach won’t work. Structural reforms have winners and losers. Reform agenda has to be a comprehensive package - to harness synergy & complementarity of reform components Massive investment in technology, physical and human capital to level playing field and equalize oppor tunities. Social protection, insurance and safety nets in view of “creative destruction”, apart from disaster risks 13

14. Lessons learned: 3. Strong and credible leadership, political capital needed to build constituencies and counter vested / narrow interests. Good governance and sound economic policymaking and management feed into each other. Long term vision and planning must be put in place by a coalition of reform champions, with support from global community. 14 GOOD GROWTH Rapid, Sustained, and Inclusive GOOD GOVERNANCE GOOD ECONOMICS

15. The scope for international cooperation Potential gains from competition and opening up of the economy are massive. SMEs need to be brought into the global value chain to make growth inclusive. Facilitate the movement of services along global value chains. Comparative advantage needs to be carefully evaluated. Reduce behind-the-border barriers. Advocacy for deeper regulatory reforms Reforms toward greater competitiveness have to be deepened. Capacity building to improve efficiency and effectiveness of regulations. 15

16. Successes and challenges in implementing structural reform The case of the Philippines Arsenio M. Balisacan, PhD Secretary of Socioeconomic Planning Republic of the Philippines 02 February 2015, Clark, Philippines