WEAK coordination among agencies and other stakeholders is limiting the country’s ability to convert investments in human capital into sustained productivity growth, the Philippine Institute for Development Studies (PIDS) said.
“The country’s development constraints stem not from a lack of policies or resources, but rather from fragmented institutional arrangements,” researchers John Paolo Rivera, Michael Ralph Abrigo and Valerie Gilbert Ulep said in a discussion paper released by the state-owned think tank.
“These arrangements lead to misaligned incentives, uneven implementation capacity, regulatory uncertainty, and weak coordination between public and private institutions.”
They noted that the country had made significant progress through reforms that helped strengthen economic fundamentals and contributed to the Philippines reaching upper-middle-income status but added that this did not mark the end of the development challenge.
“Transitioning from episodic growth to higher economic status entails a cohesive institutional reform agenda that links human capital development, productive-sector upgrading, and institutional strengthening,” the researchers said.
“Consequently, policy intent can be translated into lasting improvements in education, training, health, employability, innovation, productivity, resilience and inclusion,” they added.
While the Philippines has seen periods of macroeconomic stability, these have not automatically translated into sustained productivity growth, quality employment and large-scale transformation in human capital.
“The Philippines’ next challenge is not only to generate economic growth but also to ensure that growth becomes intentional, cumulative, inclusive and self-reinforcing,” the researchers said.
One of the biggest obstacles was said to be the fragmented way institutions, agencies, businesses and other stakeholders make and coordinate investments in education, health, skills development and other productivity-enhancing activities.
The country’s development constraints, the researchers said, stem largely from fragmented institutional arrangements that create misaligned incentives.
These weaknesses, they added, discourage or limit sustained investments in education, training, health care, and other services needed to improve productivity.
To address these challenges, the PIDS researchers proposed the development of “transformational partnerships” that would bring together government agencies, private enterprises, educational institutions, health care providers, civil society, development partners and local communities.
Unlike conventional public-private partnerships that are commonly focused on financing and delivering infrastructure projects, transformational partnerships will focus on long-term development outcomes.
“Transformational partnership is not an additional governance structure layered onto existing institutions,” the researchers said.
“It reduces coordination costs, distributes risks, facilitates information exchange, and aligns incentives among actors whose investments are mutually dependent,” they added.
The researchers identified four broad policy directions for addressing institutional constraints:
– coordinating complementary investments through joint planning and clearer responsibilities;
– creating credible long-term commitments through predictable policies and durable financing;
– building stronger institutional learning systems through better data and monitoring; and
– aligning incentives and sharing risks to encourage greater public and private co-investment.
“The Philippines does not face a choice between investing in human capital and strengthening institutions,” they said.
“Institutional reform is itself a prerequisite for making human capital investment effective, sustained, and productive.”
