Bad governance stalls EU investments in RP

Published by rudy Date posted on March 26, 2009

Long-standing problems on corruption in the Philippines, inadequate infrastructure, poor governance, unsound business policies and a weak rule of law continue to keep European investors at bay, the European Union’s top diplomat to the country said.

Ambassador Alistair MacDonald, head of the delegation of the European Commission, in his remarks before Filipino businessmen Tuesday, noted that the Philippines, in terms of EU investments, lags far behind its Asian neighbors.

Even more disappointing, he said, is the fact that the Philippines’ development performance over the past years has been less impressive compared to other developing nations in the region.

MacDonald said some of the constraints to growth in the Philippines, which have been highlighted in recent reports by key development partners, were significant factors to investors’ decision to turn to other countries for investment.

The World Bank, he said, has “pointed to the oligopolistic nature of crucial elite-captured markets in capital intensive sectors such as energy, cement, and transport, resulting in limited tax collections, hampering public capital spending and undermining private investment, while the Asian Development Bank (ADB) focused on “inadequate infrastructure, especially in electricity and transport, poor governance and critical market failures.”

Foreign chambers and local business associations in the country have repeatedly complained of “a comparatively business-unfriendly environment, with abundant red tape, an unpredictable policy and legal climate, corruption in customs and government procurement, poorly enforced Intellectual Property Rights (IPR), poor infrastructure and inadequate human capital, all working to limit growth and investment.”

As a result, EU trade with the Philippines remarkably declined since 2002, by some 2 percent per year on average, at a time when EU trade with other middle-income Asean countries has been growing by an average of 6 percent a year over that same period.”

Then in 2008, at a time of recession, when Asean exports to the EU declined by 2 percent, Philippine exports to the EU declined by 6 percent.

Unlike its neighbors, he said the Philippines has been a low-key recipient of EU investment in the region.

For the period 1995-2006, he said the Philippines received only US$1.8 billion in net Foreign Direct Investments from the EU, while Singapore got US$58.3 billion, Malaysia US$11.4 billion, Indonesia US$7.6 billion, Thailand US$7.3 billion, and Vietnam US$ 3.8 billion.”

Even if there is no great prospect of any immediate crisis in the Philippines, he said “the need for reform in the longer term remains acute.”

To attract more investors, he said, the government should remove “barriers” and improve the business environment in terms of “reducing red tape and enhancing policy and legal/contractual predictability.”

Increasing public investment in infrastructure, improving product quality, strengthening IPR enforcement, and improving customs administration should be done.–Michaela P. del Callar, Daily Tribune

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