World Bank sees 5% economic growth for Philippines

The World Bank (WB) has predicted a 5 percent gross domestic product (GDP) growth for the Philippines in 2011 and 5.4 percent in 2012.

 The WB forecast was lower than the 7.3 percent growth achieved in 2010, the highest since 1976, and in sharp contrast with the 1.1 percent expansion in 2009.

Last year’s economic growth was fuelled by private consumption, investment, and net exports.

 In its latest East Asia and Pacific economic update, the WB said that to sustain the early achievements, the Aquino Administration needs to secure its revenue base to expand socially relevant expenditures, and strengthen the investment climate.

The report noted that to markedly raise revenues, tax policy measures are needed to supplement ongoing administrative efforts.

“Key tax policy measures that would quickly raise revenues and improve social outcomes are increases in the excise tax rates of alcohol, tobacco, and petroleum.”

 “Additional measures could include—after fixing the deficient VAT refund process—increasing the VAT rate and further broadening its base, possibly coupled with some reduction in the income tax rates.”

 To expand investment in a sustainable fashion and improve the prospects of public-private partnerships, the WB urged the government to address the long-standing infrastructure bottlenecks especially power supply, strengthen governance, and improve the business environment.

 The report also noted that for the first time in 11 years, the 2011 budget was enacted prior to the start of the budget year.

“Timely passage of the budget will allow the government to front-load a significant amount of the expenditure program, especially infrastructure spending, in the first three quarters of 2010.”

“As expected, key provisions of the President’s proposed budget were left untouched by Congress despite earlier opposition. These include the more than two-fold increase in the budget for the conditional cash transfer program to cover about half of the poor households and the 19 percent increase in the budget for basic education.”

These programs are expected to help curb the rising poverty incidence in the country, the report added.

Cebu Pacific urges gov’t to modify open skies policy

Cebu Pacific has welcomed the increase in air services into the Philippines under the open skies policy but expressed concerns about certain provisions of the executive order that are apparently ill-advised. 

“Executive Order 29 would afford foreign airlines benefits so critical that if they are not reciprocated by foreign governments the growth and even the survival of Philippine carriers are at risk,” the airline said.

Under EO29 foreign airlines would be able to fly freely into and out of the country. On the other hand, Philippine carriers are limited to flights specified in existing air agreements with other countries.

Cebu Pacific cited as examples:  Hong Kong carriers could now mount as many flights as they liked to Cebu, whilst Philippine carriers are limited to 2,500 seats per week.

Chinese carriers would be able to fly from any of the major cities of Beijing, Shanghai or Guangzhou to Kalibo whilst Philippine carriers are denied such access by the Chinese.

Korean carriers would have unlimited access to mount flights to Cebu or Davao, whilst Philippine carriers are limited by the current entitlements that are fully utilized.

Singaporean or Malaysian carriers would be granted rights to fly to any country beyond the Philippines. Philippine carriers have no access to additional rights to fly beyond Singapore or Malaysia.

“Furthermore, to gain these rights foreign carriers will not need to invest billions of dollars for their Philippine operations. Their investments are in their own countries. Their employees are not Filipinos.”

CEB has invested billions of dollars to expand air services within the country and to and from the Philippines to serve the Filipino public and tourists alike with low fares and brand new aircraft.

The airline employs 4,300 Filipinos and countless thousands more are indirectly employed. “We want the same benefits from the governments of these foreign airlines. We want reciprocity which is fair and reasonable.”

“We are not asking for special favors, just a level playing field. If the benefits of air services liberalization flow only one way, we are discriminated against in our own country,” said CEB.

CEB has a strong record of supporting increased air traffic rights, and has fought hard for such increases.The airline has been a major driver of tourism growth in this country.

The airline has scaled down fares making it possible for millions of Filipinos to fly for the first time and made travel to the Philippines affordable for millions of tourists.

“We believe the push to increase tourism can be achieved, by allowing both foreign and Philippine carriers equal access to traffic rights. We do not believe it is fair to deny CEB the right to compete.”

CEB has strongly urged the government to modify EO 29 – to include the basic pre-requisite of reciprocity in any air rights negotiations.

“If the Philippine government puts out the welcome mat for a foreign airline, CEB fully supports that, as long as that foreign airline’s government grants Philippine carriers the same opportunity. All CEB asks for is reciprocity and a level playing field,” the airline added.