Fickle FDI policies stunt investments

FDI LAGGING: The development contribution of Foreign Direct Investments in the Philippines is lowest in Southeast Asia. Just two decades ago, the country was well on its way to becoming a major player in Asia together with China, Thailand and India.

Today, it lags behind its Asian neighbors, with Vietnam, rising from the ashes of war, faring even better.

Our economic policies, particularly in the aspect of doing business, is considered by the World Bank as among the most restrictive in the world, second only to Ethiopia, which does not allow foreign ownership in any business.

This may be the reason why many big investors bypass the Philippines. Last year, China’s FDI was at $100 billion, Indonesia had $10 billion, Vietnam had $7 billion, while the Philippines only had a measly $2 billion.

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PHL LEFT BEHIND: In the World Bank’s “Doing Business” report, the Philippines slipped four places to 148th out of 183 countries. Thailand was 19th and Vietnam was among the top 10 pro-business reformers.

The Philippines ranked 85 out of 135 countries in the World Economic Forum’s Global Competitiveness report, and Transparency International’s corruption index has it at 134th among 178 nations.

Unlike Vietnam and Indonesia, the Philippines failed to make it to the United Nations Conference on Trade and Development’s top 20 priority foreign direct investments destinations for global firms.

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FLIP-FLOPPING: The Philippines is the only country in Asia that does not allow 100-percent foreign ownership of businesses, particularly public utilities. Foreign ownership is limited to 40 percent as provided for in the Constitution.

The Joint Foreign Chambers has noted that “policy inconsistencies in the Philippines are causing serious concerns within the foreign investment community about the country’s ability to move forward with a healthy, reliable, and transparent mining industry policy.”

They said the unpredictable policies are evident in the judicial flip-flopping on the mining act and the foreign ownership of the Philippine Long Distance Telephone Co., the government’s confusing handling of the NAIA-Terminal 3 controversy and the Laguna Lake dredging contract.

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FICKLE WEATHER: The fickle legal environment in the country is a disincentive to foreign investors. Many times, courts issue rulings that are inconsistent with past decisions or run athwart government policies.

The sanctity of contracts, guaranteed by no less than the Constitution, is not always honored. The Aquino administration is being awaited to give a guarantee that such disregard of contractual obligations will stop.

There is need to improve FDI inflow rather than depend heavily on the remittances of overseas Filipino workers to pump prime growth.

This urgency is underlined by the unrest in the Middle East, the Saudization policy of the Saudi kingdom, the recession in Japan and uncertainties haunting the United States and Europe.

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CHINA VULNERABLE: Eyeing China both as a market and a rival, Sen. Manny B. Villar said yesterday the “gasping” manufacturing sector is still good for a grand comeback to supply products to neighboring nations like China and even compete with it in certain areas.

“Let’s forget the notion that we cannot compete with China,” the chairman of the Senate committee on trade and commerce said. “To compete, we have to help our manufacturing industries back on their feet, because they are big employment generators.”

The multibillionaire businessman said the manufacturing sector can fill in areas where China has no dominant presence such as in the manufacture of unique goods or products that can be sold in lucrative overseas markets, even to mainland China.

He said there are many opportunities that can be looked into by the manufacturing industry such as in the area of construction materials.

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HOLLOW BLOCKS: Villar gave as example cement hollow blocks which are widely used in the construction and home-building businesses where he made his billions and earned him the description of being the first “brown taipan.”

He said: “China will never be able to sell its concrete hollow blocks to us, so we are competitive in hollow-block manufacture.”

“There will also come a time when the manufacturing of goods by foreign investors in China will become expensive,” he said. “The growing Chinese middle class workers will soon be demanding higher wages and more benefits.”

Villar said when this happens, the Philippines should be able to seize the opportunity by opening up its factories and English-proficient labor force to global companies.

Aside from the narrowing gap in wages, Villar said the country can also exploit its transport advantage in shipping products to and from various destination points. –Federico D. Pascual Jr. (The Philippine Star)