Nobody’s buying Noy’s PPP, say ADB, expats

Foreign investors remain reluctant to put money on the Philippines, particularly into the flagship Private-Public Partnership (PPP) projects of President Aquino, locally based western and Asian business leaders said yesterday.

A year into Aquino’s six-year term, the US, Europe, Australia, New Zealand, Japan and South Korean chambers said investors want stronger assurances that laws and policies were stable.

The comments came as the Asian Development Bank (ADB) said the country still suffered from red tape, weak rule of law and unpredictable policies, all of which are holding back foreign investments.

The ADB report, written by Aquino’s own Socioeconomic Planning Secretary Cayetano Paderanga, was a critique of the flagship PPP program of the government in which it stated that in the Philippines, PPPs have typically been shunned by business because of unclear policy and regulatory frameworks, a cumbersome government approval process, and a lack of bankable projects.

“Other impediments such as controversial judicial decisions have also constrained PPP growth, the report noted.

John Forbes, senior investment adviser at the American chamber, suggested some firms were holding back amid concerns that rules will change mid-stream, especially when a new president takes over.

“I don’t see foreign investors coming in fast enough,” he told a press forum.

The Bangko Sentral ng Pilipinas (BSP) said foreign investment inflows to the Philippines in the four months to April fell 15 percent to $552 million and the chambers suggested this was dwarfed by capital flows to many of its neighbors.

Sean Georget, executive director of the Canadian Chamber, said the press shared part of the blame.

“It’s a huge task to change public

perspective. Much of the media only focus on bad news. What gets reported is mostly negative stories,” Georget said.

The foreign business leaders agreed Aquino had started on a positive note with a strong anti-corruption campaign and a scheme to attract private investment to build crumbling infrastructure.

But investment in roads, bridges, and airports, as well as mining, takes years to pay off, meaning it is important that policies last after Aquino steps down in five years, they said.

The Manila-based ADB said in a report released Wednesday that the Philippines was being held back be bureaucracy and, poor policy and a apparent lack of a rule of law.

It also cited high labor and power costs, poor infrastructure and a high cost of doing business.

Although Aquino plans to use private investment for infrastructure, the ADB report said the Philippines lagged behind in this area as well.

“Everything is available on paper but in reality, is lacking. Processes are not transparent, not competitive, and not robustly prepared,” the report said.

World Bank figures showed that foreign direct investment in the Philippines in 2009 was only $1.95 billion compared with $7.6 billion in Vietnam and $4.98 billion in Thailand.

The ADB report added the need for a closer relationship between micro-, small- and medium-sized enterprises (MSMEs) and large firms in the Philippines.

There is also a need to improve the accessibility and quality of infrastructure by promoting PPPs.

The ADB report, Philippines: Private Sector Assessment, outlines constraints and strategies that can boost the private sector in the country.

One of these constraints is a disconnect between large companies–mostly in the export industry–and domestic small and medium enterprises, many of which do not prosper due to lack of capital, unreliable supply chains, and weak demand for their output.

The report urges the government to help MSMEs by lowering the cost of doing business. This can be done by improving infrastructure; streamlining and removing excess administrative procedures; and creating a fair competitive environment through antitrust laws and good business practices.

“The inability of MSMEs to provide efficient and cost-effective support to large firms on the one hand, and the lack of demand from large firms for such support from MSMEs, on the other hand, present a vicious cycle that debilitates the sector,” the report said.

The vertical integration of MSMEs into large enterprises has been less successful in the Philippines than in countries like Germany and Japan.

“Effective PPP implementation can boost the country’s competitiveness, as it results in better infrastructure quality and technical expertise of people. More importantly, it contributes to efficient delivery of public services,” said the author of the report, Cayetano Paderanga, a former professor at the University of the Philippines’ School of Economics and now Aquino’s Neda director. –Daily Tribune