RP poverty up due to weak tax take, corruption - ADB study

MANILA, Philippines - Poverty remains rampant in the Philippines despite the economic growth bannered by the government because of poor revenue collections, insufficient infrastructure, and widespread corruption, the Asian Development Bank said in a study released Thursday. The study entitled “Philippines: Critical Development Constraints," said the Philippine economy has fallen behind its neighbors in East and Southeast Asia over the past five decades. "The pace of poverty reduction has been slow and income inequality remains stubbornly high," the regional lender said of the Philippines. "Governance concerns underline other critical constraints. For instance, corruption undermines tax collection, reduced resources for and quality of infrastructure development. Similarly, the political instability hinders investment and growth and reduces the tax base," it added. ADB also took note of data released by the government on Wednesday showing that 26.9 percent of families in 2006 were below the official poverty threshold, up from 24.4 percent in 2003. The regional lender also said that in 2006, the Gini coefficient of per capita income, which measures the difference between incomes of the richest and the poorest in a country, was slightly above 0.45 – the highest among Southeast Asian economies. "While growth has picked up in recent years, with the economy in 2007 posting its highest growth of 7.3 percent in the last three decades, both public and private investment remain sluggish and their share in gross domestic product has continued to decline, raising the question of whether the current economic momentum can be sustained," the lender said. Apart from rampant corruption, the report identified a number of critical constraints to economic growth and the fight against poverty in the next five to eight years for the Philippines. One of these is the Philippines' tight fiscal situation despite progress made in balancing the budget. ADB said that much of the reduction in the fiscal deficit has been driven by deep cuts in spending on social and economic services and sale of government assets, instead of better tax administration. ADB said the Philippines' share of government revenues as a proportion of gross domestic product has been the lowest among major economies in East and Southeast Asia. Another constraint mentioned by the lender is the high cost of doing business in the country, which it said is propped up by inadequate and poor infrastructure and bottlenecks. This, ADB said, prevents foreign firms from investing in the Philippines. "Latest available data shows that per capita electricity consumption in the Philippines is roughly one third that of Thailand and one fifth that of Malaysia. Similarly, per capita paved road length for the Philippines is roughly one sixth that of Thailand and one fourth of Malaysia," ADB said. - GMANews.TV