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Foreign investment seen as vital to halt Philippine brain drain

Foreign investors are the key to keeping planeloads of skilled Filipinos from fleeing their country, economists suggested yesterday.

They agreed that a drying-up of foreign direct investment had meant fewer appealing job opportunities for university graduates. The result was that rising numbers of some of the country's best educated and most innovative thinkers were joining the 'brain drain'.

Figures released earlier this week showed the unemployment rate rose to 12.7 per cent in the three months to July, up 1.5 per cent from the corresponding period last year.

Most of the extra 500,000 Filipinos without work were believed to be university graduates.

An estimated seven million of the Philippines' 80 million people already live and work overseas. A survey by the Manila research organisation Pulse Asia on Wednesday said that, given the opportunity, 22 per cent of Filipinos would leave the country, up 3 per cent from the previous poll.

The chief economist with the Manila-based Wallace Business Forum, Bing Icamina, said the Philippines' sluggish economic growth could not be blamed on a single factor. But political uncertainty was preventing an inflow of foreign capital and the resultant benefits to the economy.

Philippine monetary authorities fear that foreign direct investment this year will be less than half of an already low forecast of US$1.03 billion. Central Bank governor Rafael Buenaventura last month blamed regional and global developments, including Sars and the war in Iraq, for the Philippines being shunned by investors.

But Mr Icamina said the reason was also a matter of foreign perceptions of the Philippines.

'There are a lot of problems and they are so complex that they can't be pinpointed to one factor,' he said. 'Before they come in, investors would want to see a number of changes, including a lower cost of doing business, predictability of policies and more political stability.'

In the absence of the inflow of capital, local investment was not able to take up the demand for job-creating opportunities. Foreign investors also created overseas markets and the resultant employment spin-offs.

Growth in gross domestic product fell to 3.2 per cent in June from 4.2 per cent in the previous quarter. Before the onset of the 1997 Asian economic crisis, growth was averaging a far healthier clip for a developing country of between 5 per cent and 6 per cent.

Mr Icamina said the latest economic growth data was disappointing given that the Philippines' population growth was 2.4 per cent.

'That [rate] is not really something that can make the necessary transformations in the economy,' he said. 'Ball-park estimates are that a growth rate of 5 per cent and higher is needed to bring unemployment down to a more acceptable level of 4 or 5 per cent.'

In the absence of employment opportunities, skilled workers were boarding planes for elsewhere in Asia and beyond, Mr Icamina said.

'They have the information and resources to leave,' he said. 'Those who are reasonably skilled are the ones able to realise that aspiration.

'But the feeling that they want to leave the country is a general feeling, across all sectors of society.'

Philippines economics professor Solita Monsod said the latest job statistics showed more than 53 per cent of those who had headed overseas had had paying jobs, up 1.2 per cent on the previous quarter. This was a high percentage and a 'silver lining' for the Philippines, where the agriculture sector provided the bulk of employment.

'If you assume that wage and salary employment is the better quality employment - and that's a reasonable assumption to make - that's a good sign,' Dr Monsod said.

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