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January 13, 2013 / emmanintheworld

Sustainability Through Governance

The GDP growth rate exceeded the government’s 5%-6% target. The stock index soared, breaking multiple record highs. Consumer and business confidence was positive. The exchange rate reaching the P40:$1 territory, which hadn’t happened in years. No one can deny that 2012 was a good year for the Philippine economy.

The unexpectedly good performance of the Philippine economy in 2012, therefore, is buoying expectations for 2013. Add to that the positive effect of elections in consumer spending, and it would seem like it would be another rosy year for the Philippine economy.

However, the improving situation of the economy should not make the public, especially the government, be complacent. There are still a lot of fundamental concerns that needs to be addressed. One of these is the issue of sustainability.

Sustaining the 2012 growth, not only for this year but for a longer time period, should be the focus  of the Aquino administration. Growth without a long-term vision would eventually lead to crises, similar to the current Euro crisis and the United States’ so-called Great Recession. Unsustainable growth would also expose the economy to volatility that would lower the country’s long-term economic prospects.

In order to achieve sustainable economic growth, the government should take steps in strengthening the institutions in the country. Perhaps one of the country’s problems, in terms of governance, is the tendency of administrations to criticize and dismantle the gains that the previous administration had for political mileage. This presents a huge problem for the country’s long-term progress because it discourages the construction of key infrastructure that would take more than 6 years to build.

This encourages the government, especially local-level politicians like congressmen and governors, to spend their budgets on visible, short-term projects like waiting sheds, basketball courts, and the repaving of roads. Consequently, the rehabilitation of the railroad network, sewerage system, and other long-term projects are set aside.

Putting in place a culture of transparency and honesty would also go a long way in sustaining growth as it would discourage the creation of complicated and ‘creative’ instruments and procedures for the benefit of the few. Coupled with a conducive environment for vigilant media organizations, a culture of transparency and openness would increase the costs for government officials and top executives to cheat the public.

There are many other ways to achieve sustainability through governance. The point is that the issue of sustainability cannot be addressed by economic policies alone. It requires the strengthening of both economic and political institutions.


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