By Josielyn Luna-Manuel, Special Features Editor
At the recently concluded BusinessWorld Economic Forum, with the theme, “Charting Progress to 2020,” the session on “Regulations & Incentives” highlighted the significance of sustainable and inclusive growth in reducing poverty and strengthening the economy. Three speakers from the public and private sectors explained that this can be achieved through the proper implementation of the Philippines Competition Act, creating efficient regulations, and exploring opportunities to accelerate growth and employment.
Growth through competition
Arsenio M. Balisacan, chairman of the Philippine Competition Commission (PCC), delivered a speech entitled “Toward a More Sustainable and Inclusive Growth Path.”
The Philippine economy is on a higher growth trajectory with a 6.2% average in six years. However, “the challenge is to make our growth more inclusive so that poverty reduction will be faster,” he said.
One of the key strategies that will make economic growth more enduring and more inclusive is the Philippine Competition Act, the law which created the body that he now heads.
“Simply put, the Philippine Competition Act implements the National Competition Policy of the Philippines,” he said.
Mr. Balisacan discussed some factors that led to the need to pass the law, also known as Republic Act 10667, which was enacted by former President Benigno S. C. Aquino III in July 21, 2015 and became effective in August 2015.
Among these factors are the comparatively poor performance of the Philippine economy over the last four decades; unequal distribution of opportunities, perpetuating a condition of widespread poverty co-existing with affluence and prosperity; extreme difficulty for small and medium enterprises (SMEs) to thrive and prosper, hindering the growth of employment opportunities; and the failure to be a significant player in the prosperous Asian region.
Cartel-busting, public welfare-promoting legislation
Mr. Balisacan said that the Philippine Competition Act is a “game-changing legislation” created to combat “very restrictive economic policies and anti-competitive business practices that have been too costly to the economy and public welfare.”
The Act also created the PCC, an independent, quasi-judicial body with primary and original jurisdiction in all competition-related issues.
According to Mr. Balisacan, the PCC has powers to address competition inefficiency issues such as enforcing legal prohibitions against anti-competitive business agreements, including cartels, and the abuse of a dominant market position; regulating mergers & acquisitions that are likely to substantially prevent, restrict or lessen competition in the relevant market; examining markets which may not be working well, with powers to impose remedies where an adverse effect on competition is found; and promoting and encouraging competition-enhancing practices and challenging barriers to competition.
He added that the PCC is also mandated to review economic and administrative regulations as to whether or not they adversely affect relevant market competition; and to advise the Executive Branch on the competitive implications of government actions, policies and programs.
He also invited the forum’s audience, comprised of various company executives and government leaders, to participate in PCC’s programs and advocacies.
Regulation is an incentive
For Teresita J. Herbosa, chairperson of the Securities and Exchange Commission (SEC) who talked about “How Can We Incentivize Businesses to Pursue a More Sustainable and Inclusive Growth Path,” regulation itself is an incentive mechanism.
“While the SEC will continue to look for direct incentives that we can give to companies, we think that good regulation is a better way of incentivizing businesses,” she said.
She narrated the state policy for SEC, which is part of the Securities Regulation Code: “The State shall establish a socially conscious, free market that regulates itself, encourage the widest participation of ownership in enterprises, enhance the democratization of wealth, promote the development of capital market, protect investors, ensure full and fair disclosure about securities, minimize if not totally eliminate insider trading and other fraudulent or manipulative devices and practices which cause distortions in the free market.”
Among the roles of the SEC are adoption of efficient automated processes and procedures, promotion of good corporate governance, certification and accreditation of market intermediaries and professionals, requiring more transparency in financial reporting, proposing amendments to the corporate code, allowing one person corporations, imposing criminal corporate liability, protecting whistle-blowers from retaliation, changing 50-year term to perpetual, setting up of the country’s national credit registry to benefit SMEs, heading the Microfinance NGO Regulatory Council, and standing as signatory to the National Strategy for Financial Inclusion.
She expects that the Philippine economy will continue to grow until 2020 and beyond, and hopes that this growth will benefit all sectors of the society. “Inclusive growth means opportunities for all. Good regulation is still the best incentive for businesses to thrive and survive,” she said.
How the Philippines could boost growth, create more jobs
Suraj Moraje, managing partner of global management and consulting firm McKinsey & Co., said that with the Philippines’ consistent growth since 2000, the country will constitute some of the ASEAN’s largest consumer markets.
In his talk on “Accelerating Growth and Employment,” he presented six opportunities for the Philippines to increase growth and boost its job market. These include orchestrated approach to own some sectors, renewed focus on agriculture, re-imagined Business Process Outsourcing, greater external orientation, sustained infrastructure investments, and modernized skill development.
“The world is becoming a difficult place to navigate which gives us a lot of opportunities,” he said, adding that the Philippines can explore opportunities in sub-sectors in the region where it is expected to lead.
“For example, Manila will be the second largest market for diapers in 2030. We should be manufacturing more diapers,” he said.
In the list of ASEAN cities by consumption he presented, Manila ranked third as a market for diapers in 2013 but is expected to rank second in 2030. Also, in 2013, Manila topped the list for detergent markets and is still projected to rank first in 2030. As a market for facial moisturizer, Manila ranked fifth in 2013 and is predicted to place second in 2030, while Cebu ranked fourth in 2013 and might place fourth in 2030.
According to Mr. Moraje, “sustaining recent agrifoods export growth could triple its value by 2025.” Hence, he suggested that the Philippines should revive its focus on agriculture.
He shared that experience in other countries shows that dramatic shifts in agriculture can be achieved. He cited Morocco as an example which achieved 43% agri growth in four years by targeting internationally competitive crops such as citrus, olives, vegetables and fish.
Mr. Moraje also stressed that the country has many extraordinary skills to tap into. Philippines is a service-oriented nation, he said, adding that “Filipinos are able to deliver service as other countries can.”
He also highlighted that one of five seafarers globally is a Filipino, with Philippines ranking third (18%) in the 2010 global seafaring population, following Europe (19%) and ‘others’ (27%).
In addition, the country has the highest density of health care workers, he said. “We believe, for example, that if we could grow medical tourism, this could add a couple of billions of dollars [to the health care sector],” he said.
Mr. Moraje also shared that the Philippines has the fewest locally-headquartered large companies in ASEAN. According to him, as of 2010, it had 19 companies with a company revenue of $47 billion and 2.5 average revenue per company. “The ASEAN Economic Community could present opportunities to quickly change that,” he said, noting that the health care and financial services industries have the highest growth potentials.