NEDA: Comprehensive strategy to open up services sector needed for inclusive growth

From the National Economic and Development Authority There is a need for a more decisive, innovative, and strategic approach to further open up the Philippine services sector to realize its potential for growth and employment generation, according to the National Economic and Development Authority (NEDA). This statement was made by Secretary of Economic Planning Arsenio M. Balisacan, in an opening speech read by NEDA Deputy Director-General Emmanuel F. Esguerra, during the National Workshop on Services at the AIM Conference Center in Makati City on June 2, 2014. "Overall, the fast growing industry sector, the growing middle-income class, the continued strong inflow of Overseas Filipinos’ (OF) remittances as well as the increasing number of skilled Filipinos boost the demand for services sector and this bodes well for the growth of our economy,” said Balisacan. Balisacan said that a number of strategies have been identified in the Updated Philippine Development Plan 2011-2016 that will further strengthen the services sector. The Updated Plan articulates the Philippine government’s pursuit of inclusive growth. Apart from attaining the prerequisites for rapid and sustained growth such as sound macroeconomic fundamentals and capital accumulation, it aims to broaden the basis and spread the benefits of such growth by improving people’s access to opportunities through investments in physical connectivity and human capital. "The government shall remain focused on its policy commitments, and shall constantly engage the private sector to help realize substantial gains from available opportunities, including the fast- approaching ASEAN Economic Community (AEC),” the cabinet official reiterated. In a separate session of the same event, Esguerra noted that the services sector has the potential to contribute to inclusive growth through two channels. First is through employment and export earnings and second is through the economic transformation made possible by the critical inter-sectoral linkages they provide. "Transport and logistics services facilitate movement of people and goods; retail and wholesale trade connects producers to consumers; business services improve product quality and reduce firms’ operating costs; financial services direct resources from surplus units (savings) to deficit units (investment); telecommunications reduce the cost of sharing information. With respect to the thrust on human capital investment, education and health services raise the productivity of the work force,” he explained. Both officials acknowledged the need for a comprehensive services strategy that will address challenges in the sector. Esguerra emphasized that such a strategy can only emanate from a full appreciation of what the pursuit of inclusive growth in the present context implies for services. Esguerra said that the strategy needs to address several challenges in the sector to make it competitive, to spur growth in other sectors, and generate quality employment. "The Philippines is considered as having one of the most restrictive policy regimes for services, with the highest degree in professional services. Moreover, the services sector is faced with challenges such as low levels of productivity, employment vulnerability in most services subsectors, and continued concentration of the sector’s gross value added (GVA) in certain regions, particularly the National Capital Region and Region IV-A,” said Balisacan, who is also NEDA Director-General. Aside from measures that limit market access, Esguerra added that restrictive measures are also present in the nature of balance sheet requirements as in the Retail Trade Law of 2000 or limits in the number of branches or franchises. Local governments also impose regulations that affect the efficient supply of services. In addition, anti-competitive business practices also occur even with existing regulations. Citing a number of approaches identified in a policy paper titled "Formulating the Philippine services strategy for inclusive growth” prepared by the Philippine Institute for Development Studies (PIDS), he said that the national services roadmap must include domestic policy reforms, innovations, export promotion, and trade negotiation strategies. "Among the important domestic policy reforms are the rationalization of the educational system to adapt to the ever changing requirements dictated by the rapidly changing or evolving technologies. Operationally, better government coordination is critical especially among agencies in charge of policy and regulation,” he said. "To promote innovation, services providers must be organized into a consortium to realize synergies. Among export promotion strategies, shared service facilities must be provided to serve as vehicles for marketing, networking, market research and client matching. One might also add deliberately engaging the Filipino diaspora and tapping this huge market for Philippine services. Among trade negotiation strategies is the negotiation of Mutual Recognition Arrangements (MRAs) and similar international instruments for accreditation and recognition,” he added. Balisacan and Esguerra reiterated that there must be a demonstrated synergy of efforts among the various stakeholders and government, for the pursuit of a comprehensive services strategy to be realized.//