Enabling Rural Enterprise in the Philippines

Enabling Rural Enterprise in the Philippines

The Enterprise Research Institute

Washington, DC

Introduction

The World Bank “Strategy for Rural Development, Reaching the Rural Poor”(2002), finds that a majority of the world’s poor are located in rural areas. It also recognizes that to reduce this poverty, more must be done to create employment opportunities in the rural areas.  Therefore, a vibrant and growing rural economy where regulatory and economic conditions are conducive to the creation and growth of business is critical.  To this end, the East Asia and Pacific Region of the World Bank has commissioned a series of country studies to examine the enabling environment for rural enterprise.  This report is the first of those studies, designed to identify key policy and regulatory constraints to rural business in the Philippines.

The working principle underlying this study is that many incentives and disincentives to the creation and success of rural business exist but only a small number are critical to the immediate performance of rural businesses.  Accordingly, the intent of this report is to identify and describe in some detail only the most important constraints facing rural business and suggest ways in which these constraints can be overcome.  The report is intended to have immediate, practical value for the policy discussion on rural development.

The report will begin by providing an overview of the Philippine economy – both the national and rural economy. In addition, this section will discuss the relationship between the rural sector and the government and provide some initial insight into some of the constraints that are faced by the rural economy in the Philippines and the environment that is necessary for this sector to thrive. Once this context is established, the paper will review property rights – a critical component of rural development. The land reform program in the Philippines will be discussed to determine whether it has supported or undermined those rights. The infrastructure sector of the Philippines will be reviewed then the impact of the capital markets, particularly access to credit and the impact of interest rates, will be reviewed. Finally, a examination of the World Bank’s activities in the Philippines will be conducted with the ultimate aim of providing policy and future project recommendations that will support enabling the rural economy.

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