Would you invest here?

The prices of 97 medicines were ordered halved last week—this is now the second batch after 43 were forced to halve prices last year. Overall, 140 types of drugs have been forced to lower prices despite that there were low-priced alternatives on the market. And it’s mostly the rich, not the poor, who benefit. It’s just a nice political sound byte.

The price of oil was capped at an artificially low price for a month resulting in substantial losses for the oil companies. For the same political reason.

A mine (Lafayette) was closed for a mining spill that did no measurable damage. A delay of over 6 months to approve re-opening forced the company into bankruptcy. Bishop Arturo Bastes lied to encourage that closure, which the government acquiesced to.

A nickel mine’s environmental compliance certificate that had been approved and upon which the company had started operations was withdrawn on complaint of some rabid non-government organizations and, again, the Church. For those who object to mining, think of this: More than 50 percent of Australia’s exports are derived from minerals. In Chile, it’s 60 percent. In the Philippines, it’s five percent. If the Philippines was similar, let’s say 50 percent, that would be $20 billion in additional exports. That’s at least P300 billion (local gross value-added) more money the Philippines and Filipinos could have but don’t.

Mining companies build roads, schools, clinics, and other basic facilities because the government has failed to do so. They also invest in some of the poorest areas. For example, the $250-million gold project of CGA Mining and Filminera Resources is the biggest investment in Masbate while the $5.2-billion Tampakan project would be the largest ever in Mindanao. In fact, this would be the largest ever single investment in the Philippines

Are the NGOs and Church prepared to provide that? I want people to have jobs. Currently that five percent of exports provides 160,000 Filipinos with jobs. If mining could contribute half of exports, that would add up to a million jobs. I’ve never heard of an NGO providing a job yet.

The Health Department wants to ban aerial spraying of crops despite the fact that there’s been no proof of any harmful effect. In fact it’s the reverse, it’s more harmful to apply at ground level—but less visible than a plane. If enforced, that will be the end of our export business in tropical fruits.

The government’s waste-to-energy project with an Australian firm was canceled, five years after its approval despite a Supreme Court decision declaring the contract “valid and perfected.”

An executive order that was issued effectively nullified a deal between the Department of Energy and a Malaysian company on Malampaya oil exploration in 2006. The contract between the two parties had not be signed, but was about to be.

A city ordinance re-classified Pandacan as a residential/commercial area, and called for the relocation of the oil depot that had been there first, and despite proof that the depot was safe even in the case of a major accident. Fortunately, the mayor gave a respite. But what if there’s a new mayor who just arbitrarily reverses Mayor Lim’s decision, as he easily could? Policy changes with people.

The fiscal incentives granted to some 300 investors in Clark ecozone were nullified after the locators had invested based on getting the incentives promised. The courts contended that the law granting tax privileges to Subic did not “categorically and unmistakably” include Clark, even though it obviously and logically was meant to.

The International School was told to uphold equality of pay between foreign-hired and locally-hired employees—something that is not done in any other sector, and is not done in most other developing countries – retroactively for 5 years. It cost the school $4 million to settle the case.

An agreement between the Public Estates Authority and a Thailand-based development company to sell 592 hectares of reclaimed land to the latter was rescinded through a subsequent ruling that the reclaimed land was public land and hence could only be leased but not sold and owned by private entities.

A local firm was declared as winner five years after a Singapore-based company won the Subic shipyard project.

A rate increase by Meralco was canceled as it was based on a price adjustment formula that the Court disallowed despite the fact that the formula had previously been agreed to, had undergone public scrutiny and had been in use for many years. Worse, the court ordered retroactive refunds that impaired the creditworthiness of the distribution utility. On top of that, Meralco was told that tax was not a business expense (then what the hell is it?) and cannot pass it on to consumers (thus, overturning a 20-year-old accounting practice that prevails in all businesses, which treats tax rightfully as an expense and should be passed on).

The new international terminal is expropriated and the contracts canceled without recompense. It has sat in court for almost nine years, unresolved.

Shell was told to pay double tax, retroactively when no one else is doing so. It was threatened with confiscation of its products because the government re-interpreted a classification it had accepted for six years.

Contracts with independent power producers were renegotiated by the government in 2001 as a populist move to bring electricity rates down and reduce state guarantees under the IPP contracts. The power producers consequently lost $1 billion in expected revenues. There’s been almost no major investment in new power since, a principal reason blackouts are now occurring. This was a foolish, populist move that has expectedly had serious repercussions. It’s not because of mechanical failures in a couple of plants as the President claimed on Wednesday. Those failures are expected, that’s why you must have a 25-30 percent reserve. We don’t.

On power, I can’t do better than repeat a recent (February 27) Star editorial, to wit: “Like the energy crisis from 1991 to 1992, the ongoing power shortage is again due to inefficient planning for the country’s energy needs, compounded by policies that have deterred much-needed large-scale investments in the energy sector. The ongoing energy shortage will not go away with the end of El Niño. It will take several years before the power plants that can produce sufficient energy to meet the country’s power demands can be built.

“Fidel Ramos managed to stabilize the power supply in 1992, but the rush meant the country had to pay a steep price for it. In subsequent years, shortsighted, populist policies in power pricing, the failure to honor contracts, and political meddling in the operations of private players in the energy industry have dampened investor interest in this sector.

“Today the country has the second highest power cost in Asia, and is approaching the same crisis situation before Ramos stepped in with the power barges. The difference is that the industry has learned its lesson on policy inconsistency in this country, and this time it won’t be easy for the government to make investors take any bait.”

I’ve been warning of this potential crisis for several years now because it was apparent this would happen. But my warnings had no noticeable effect. So the President must take the credit for her failure to act before this became a crisis.

Foreign investors have shied away in droves because of these inconsistencies—the Philippines has garnered the least foreign investment among major Asian countries in the past 10 years. That, not rose-colored press blurbs, tells you all.

The top task of the next president will be to revive investor confidence. That will not be easy. And it won’t happen overnight. A first requirement will be consistency of policies and decisions that can only be achieved through proof over time. Promises mean nothing. Mind you, it could be shortcut by government guaranteeing a minimum return on investment in public utilities, but that will require a law that will need strong persuasion to pass. And how do you assure it won’t be rescinded at a later date?.

Reversing the negative perception of the Philippines will be quite a job.

***

A couple of weeks ago I wrote about the great, cheap idea of using mobile phones for farmers and fishermen to find out what’s going on.

I got a heartening e-mail from Olive Asis of PhilRice—they’ve done it! Let me quote some of her letter (edited for brevity): “In August 2004, the DA-Philippine Rice Research Institute (PhilRice) launched the Pinoy Farmers’ Text Center (FTC) with the number 0920-911-1398. This number is being promoted to farmers and extension workers nationwide.

“FTC provides quick response to queries of farmers and AEWs. Through the FTC facility, farmers and extension workers ask questions and get answers directly from rice experts at PhP1.00 per text only. From 11 text messages during its launch in 2004, the FTC now receives an average of more than 2,000 messages a month. Queries are mostly on rice but we also try to answer queries on livestock, vegetables, and other high-value crops with the help of experts from State Universities and Colleges and other DA agencies.

“Aside from responding to queries, the FTC also sends technology tips to registered clients.

“In cases where there is a PhilRice branch station near the farmers who are asking solutions for their diseased crops, we dispatch our experts to the farmers’ fields.

“We have text center agents in various PhilRice Branch stations who are on board from 8 to 5 p.m., Mondays to Fridays.

“Aside from text messages, we also encourage farmers to send a photo of their diseased rice crops through MMS. We can receive MMS in our 0930-95099698 number. Currently, we are testing the use of cellphones to gather data from the farmers.

“Last year, the Department of Agriculture launched its Farmers’ Contact Center with the number 0928-449-0965”.

There was more with some further detail, but that’s pretty impressive, isn’t it? Good on them. May their tribe increase— a challenge the DA can take up in the next administration.

Comments to my columns can be sent to wbfplw@smartbro.net