The Philippine foreign investment problems?

By BusinessMirror Editorial, Jun 7, 2018

The American Chamber of Commerce of the Philippines (AmCham) is an important part of the local business scene and has been for nearly 100 years. Its stated purpose: “The Chamber exists to serve the interests of Philippine and American businesses through the participation of members in promoting their long-term objectives, while contributing to the civic and economic development of the Philippines”.

This past week, the AmCham was reported as providing an analysis on foreign direct investments to the Philippines. Once again—or maybe as usual—the discussion starts with the Philippines “lagging” behind our neighbors. Then, maybe grudgingly, is the fact that 2017 saw the greatest amount of FDI coming in and receiving more than both Thailand and Malaysia.

We all know that the Philippines has been a laggard for many years despite the seemingly best efforts of succeeding administrations to improve our standing. But the “problems” that the Philippines confronts in getting FDI never seem to change, and there might be good reasons why.

While we respect the views of the AmCham, no organization like this is completely unbiased and probably should not be. However, when foreign business groups start talking about what should be changed, it always seems that changes are in the best short-term interests of the investors and, hopefully, in the long-term interest of the nation.

It is like the person who owns the bread factory advising the meat companies that they should promote sandwiches. Certainly, selling sandwiches would help sell more meat, but it also sells a lot more bread.

The AmCham was quoted as saying that the Philippines and Vietnam are nearly compatible in most aspects, with the sizes of their work forces almost similar. How many times have we heard that? And then, the Philippines has downsides, such as major manufacturing cost factors like electricity cost, higher minimum wages and too many nonworking holidays in comparison to other countries. Once again, how many times have we been told those are major problems for us?

But let’s be realistic. Vietnam generates nearly 40 percent of its electricity from hydroelectric sources, the most cost-effective and efficient power generation available. Vietnam has 306 hydropower plants in operation; the Philippines has less than 50. While the Philippines will adopt more efficient and cheaper energy sources in the future, nothing can be done immediately as the country tries to meet its energy needs. If low-cost electricity is what FDI is looking for, then the Philippines is not the place.

The average monthly minimum wage in the Philippines, as of last year, is between $172 and $300. For Vietnam the numbers are $147 and $166. So now the AmCham suggests we must be “competitive” with Vietnam? It is intellectually dishonest—and actually a waste of time—to say that the Philippine minimum wage is a problem without offering a solution.

Maybe you also get what you pay for. Last month the latest Vietnam Annual Economic Report shows that Vietnam’s labor productivity remains among the lowest in Asia, 1/18th of Singapore, 1/16th of Malaysia, one-third of Thailand and China, and less than one-half of the Philippines’s.

As far as nonworking holidays go, the difference in the number of holidays based on 260 working days is about 2 percent. No worries; the Philippines easily makes up those few days in increased productivity.

Finally, two days ago it was reported that over 1.2 million computers in Vietnam had been infected with W32.XFileUSB, which can delete data on USB drives, according to Vietnamese leading computer-security firm BKAV. Virus infections made computer users in Vietnam suffer losses of $544 million in 2017, from $460 million in 2016. Welcome to the Philippines.