Let us be

Last week, I warned that government intervention in business was a major deterrent to business. We have a government that professes its wish to attract investors and its desire to do everything necessary to make the Philippines a desirable place to invest, yet its actions too often do the very reverse.

The foreign investment numbers tell you that dramatically and forcefully. The miserly US$1.7 billion (from January to November) last year put the Philippines at the bottom in Asia. And it wasn’t because of the world financial crisis. Other countries didn’t suffer the same level of decline and the Philippines has had the lowest level almost every year in the past 10. Cumulatively, just look at the numbers.

FDI Inflows of Selected Asian Countries (in US$ billion)

Country *2008 1990-2008 2001–2008 China 92.4 824.8 50 3.3

Singapore 10.3 182.5 97.8

India 36.7 99.6 82.1

Malaysia 12.9 81.1 36.0

Thailand 9.2 72.7 37.9

Indonesia 5.5 27.2 11.1

Philippines **1.7 25 .0 11.5

Source: UNCTAD

* FDIs in 2008 are UNCTAD projections based on data available (as of Dec. 19, 2008) for 103 economies for part 2008.

** RP FDI for 2008 from January to November 2008 only.

If you look at just the Arroyo years, it shows the lowest FDI level in real terms (expressed in 2007 prices) of any administration since Marcos. Aquino averaged US$2.8 billion per year during her term, Ramos US$3.6 billion, Estrada a short-lived US$2.2 billion versus Arroyo US$ 1.7 billion. The world is not interested in the Philippines.

I gave one reason why last Friday, intervention by government in business. It was reinforced just a day later when Cerge Remonde, speaking presumably for the Palace said, “It’s really about time that we revisit the Oil Deregulation Law.” Just when Shell, in the midst of a world crisis, is mulling whether it should upgrade and expand its refinery—or close it. Chevron already closed its own, and with Petron now in private hands, it might as well consider doing the same.

Companies don’t invest where governments step in and control the price at which they can sell to a below reasonable profit or even at a loss. As it is at the moment, it’s cheaper to refine in Singapore and ship the finished product here. Although the question now is: Where is here? The Supreme Court, in an unbelievable decision, said the oil companies must move out of Pandacan.

Even though they were there first. And even though they can prove that even a major disaster poses no direct risk to locals. Technical facts are not, it seems, a consideration in Supreme Court decisions these days—as the most recent decision that stops Transco from putting power lines over Dasmariñas Village on the unsubstantiated claim that it would cause electro-magnetic damage to humans shows. The World Health Organization, which cares for human well-being, has found that there is no discernable effect on humans of exposure to electric fields of up to 20 kV/m. In fact they could find no effect on human physiology at strengths up to 100 kV/m. Even if we assume there is a link, the strengths of the fields from the power lines are a critical element. EMF radiation measurement conducted on the Sucat transmission line along the periphery of the Dasmariñas Village measured 0.00201 kV/m and 0.496 mG —both at below detectable levels.

This incident raises another interesting thought in my mind. I don’t presume to comment on legal matters and the rightness or wrongness of a legal decision from the legal point of view. It’s not my expertise. Yet lawyers make decisions or pronouncements on technical, economic, business, even financial matters where they do not have the training or expertise to do so. Decisions that can greatly affect our lives.

I’ve said it before (many times sadly), courts need “friends of court” experts to guide them on technical matters before coming to a decision. I’d almost say it should be mandated by law; there should be no choice but to do so.

But back to the administration, it’s got to stop pandering to populist pressures if it truly wants a strongly growing economy. If it wants to establish a controlled, socialist economy, it might want to look at the history of the world first.

I’m getting increasingly frustrated with the way this government conducts seminars and summits, prepares voluminous plans—and then fails to enact them or even, as in this case, does the reverse. I suggest the President immediately issue a statement refuting Mr. Remonde’s statement and assuring the oil companies, and frankly all other businesses, that government will not exercise non-commercial control over business.

At least she will if she wants business. The Oil Deregulation Law works, leave it alone. — Peter Wallace, Manila Standard Today

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