Inadequate infrastructure is a major constraint...

First, the country's investment record has been poor and falling (Figure 1.3). As a share of GDP, gross domestic investment peaked at about 24.8 percent, before falling to just 15.6 percent in 2010. In contrast, investment in Malaysia and Thailand soared to over 40 percent of GDP, and although they have dipped since the Asian crisis, their levels are still way above that of the Philippines (except for Malaysia). Not only is the Philippines' investment ratio low, it has also been falling since the mid-1990s, down to 15.6 percent in 2010. This fall in capital accumulation is a constraint to long-term economic growth and employment-generation.

Table 1.3 Transport Infrastructure Ranking of Selected Countries (out of 139)

Source: The Global Competitiveness Report 2010-2011, World Economic Forum (2010)

Weak investment - particularly in the face of a surfeit of national saving - is a clear sign of a lack of productive opportunities in the economy. Inadequate infrastructure and a resulting poor logistics network have been identified as among the critical constraints to investment and growth (ADB, 2007). Besides stimulating investment itself, infrastructure helps improve total factor productivity, enabling the country to produce more from each amount of input, effectively lowering unit-cost.

An inefficient transport network and unreliable power supply have been identified as the most significant infrastructure constraints on overall growth. The percentage of paved roads to total roads in the country remains one of the lowest in the Southeast Asia. Similarly, the quality of the country's port, air, and railroad infrastructure leaves much to be desired (Table 1.3). Unless urgent action is taken, the hitherto slow pace of investments in power-generation threatens not only growth but also the realization of many critical social and economic goals under the Plan. Currently, power is already in short supply and unreliable in some parts of the country.