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An exporting country like the Philippines needs to continue improving its transport and logistics infrastructure to seize new opportunities in global markets. This is according to Gilberto M. Llanto, a senior research fellow at the Philippine Institute for Development Studies (PIDS).

In a paper entitled “Investing in Local Roads for Economic Growth”, Llanto pointed out that while the Philippines has relatively improved its transport and logistics performance, it has lagged behind neighboring ASEAN countries such as Malaysia and Thailand.

He urged the country to intensify its focus on making transportation and logistics more efficient, noting that, “Exporting countries, which have been able to effectively address both border (e.g. tariffs) and behind border issues (e.g. transport and logistics), have been able to exploit new and bigger markets opened by globalization and trade liberalization.”

Citing a 2006 study, Llanto said improved road network quality has been associated with higher intra-regional trade flows. Simulations suggest an ambitious but feasible road upgrade could increase trade by as much as 50%.

He said more road network investments are imperative in boosting trade and local economic growth and are a key to poverty reduction.

“A severe underinvestment in good quality roads has certainly contributed to the high cost of doing business in the country,” he added. “A good network of roads at the local level is indispensable in the timely movement of people and transport of goods with low transaction costs.”

To meet infrastructure needs, Llanto underscored the need for local governments to launch a vigorous revenue mobilization campaign, which may involve plugging tax leakages.

“Real property taxation is an underutilized source of local revenue in the country in contrast to its being a mainstay of local finances in more developed countries,” he said. Moreover, Llanto said local revenues should be utilized to produce local public goods that serve the people and not a few vested groups.

”People will be convinced to support government efforts to raise revenues once they experience an improvement in public service,” he noted. “However, weak governance and corruption erode the credibility of local governments, which may face strong resistance to attempts to increase the level of local taxation.”

Apart from these measures, the PIDS paper said there is need to improve the procurement system involving local roads, ensure that local roads form part of an efficient road network, and conduct an audit of past utilization of road funds for more effective and efficient use.

“Raising additional money to fund local roads is only a part of the solution. Much more will depend on the quality and strength in governance and adherence to good planning, budgeting, and procurement practices in the national government and local government units,” it added.

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