WB: Businesses key to PHL becoming ASEAN growth engine

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By Justine Irish D. Tabile, Senior Reporter

THE PHILIPPINES’ ambition to become Southeast Asia’s next economic growth engine depends on the private sector’s ability to invest, expand and innovate with confidence, the World Bank (WB) said.

The message today is this: better jobs and prosperity for Filipinos require better conditions for firms to invest, grow, upgrade and become ASEAN’s (Association of Southeast Asian Nations) next growth engine,” Zafer Mustafaoğlu, World Bank country director for the Philippines, told the ����ý Economic Forum on Monday.

He warned that the US-Israel war on Iran, which has pushed up oil prices, is slowing economic activity and lifting inflation pressures.

The Philippine economy grew by a weaker-than-expected 2.8% in the first quarter, as surging oil prices and the lingering fallout from past domestic scandals weighed on activity.

Inflation accelerated to 7.2% in April, above the Philippine central bank’s forecast and target for a second straight month.

Mr. Mustafaoğlu in his keynote said investment weakness is the key concern because it signals fewer expansions, upgrades and productivity improvements that ultimately limit job creation.

Gross capital formation contracted 3.3% in the first quarter, reversing a 4.5% gain a year earlier but improving from the previous quarter’s decline.

����ý President and Chief Executive Officer Miguel G. Belmonte said the Philippines’ ASEAN chairmanship highlights both opportunity and the need to address domestic competitiveness gaps.

“ASEAN has no shortage of frameworks and roadmaps, from economic blueprints to sector-specific agreements,” he told the forum. “The region has outlined its vision to become one of the world’s biggest economic blocs by the end of the decade.”

He said ASEAN integration goals are well defined, but the Philippines must fix infrastructure bottlenecks and productivity constraints to benefit fully.

Jamil Paolo S. Francisco, executive director of the Asian Institute of Management – Rizalino S. Navarro Center for Competitiveness, said the Philippines has stagnated in global rankings despite earlier gains.

He said productivity gaps remain wide, with the country producing significantly less output per worker compared with regional peers such as Thailand.

“Competitiveness can be tricky because it’s a race,” he pointed out. “Development is a marathon, not a sprint. But here’s the thing — in this marathon, we are getting left behind.”

Anthony Oundjian, Boston Consulting Group Philippines managing director, said the Philippines lags behind its ASEAN peers in terms of output.

“Even though we have the demographics and the consumer market, we really lack scale in productivity per worker,” he said. “We are at around one-fourth of Thailand’s productivity per worker.”

He added that predictability in policy implementation is critical for long-term investment decisions.

Grab Philippines Managing Director Ronald Roda said fragmented local requirements slow business expansion across cities and municipalities nationwide.

Mr. Mustafaoğlu said the Philippines could still attract more foreign investment and move up the artificial intelligence (AI) value chain if reforms accelerate.

He said delays in permits, port congestion and complex paperwork continue to raise costs and discourage firms from expanding.

He urged reforms in business registration, border management and trade agreements to improve competitiveness and reduce transaction costs.

He said business registration in the Philippines takes about 78 days versus one day in Singapore and two in Malaysia.

He also said inefficient border processes act like a hidden tariff that raises costs and slows global supply chain integration.

He added that maximizing free trade agreements could boost productivity through cheaper inputs and stronger competition.

“The country already has a foothold,” Mr. Mustafaoğlu said. “Through semiconductors and intermediate inputs, the Philippines is already connected to the hardware side of AI. But the country is not yet capturing the full opportunity.”

He said the Philippines must move beyond assembly operations into higher value-added activities such as design support, testing and AI-enabled services to remain competitive in the region.