The editorial in this newspaper on June 17 lamented how we are almost last in Asia in attracting foreign investments. It ended by saying:
“If Congress and the administration can get their act together and move to address decisively the obstacles and bottlenecks to the entry of more foreign investors, the Philippines may yet become a more attractive destination for doing business, and land somewhere in the coveted upper list of beneficiaries of foreign direct investments.”
We in the business community have been telling the country’s leaders in the executive branch and Congress the things that need to be done — for decades. They haven’t done them, or have created laws that actually deter investments.
I can’t cover them all here, but as a start, let me raise the one I’ve done so often: security of tenure. It’s one of the worst restrictions a country can impose. If you can’t fire someone for incompetence or low performance, you’ll go to a country where you can. Security of tenure ensures mediocrity and encourages laziness. Hundreds of thousands of jobs aren’t created because businesses go elsewhere.
Worldwide, it’s been shown that successful countries provide labor flexibility. Managers don’t fire someone for no reason; they have to hire someone else if they do, and that’s a pain in the neck. If someone loses a job over poor performance, someone who will work harder gets hired. Why would even the most heartless of managers want to fire someone who’s doing a good job? No job is lost, productivity goes up and more investors will be enticed to do business here.
As I have previously pointed out, security of tenure is reducing the number of jobs available. And I can assure all those who still want this permanent employment concept to continue that it is deterring many, many companies from investing further, or at all.
Trouble is, it’s (foolishly) in the Constitution, so a way around it needs to be found. That way could be “for cause” as that is allowed, but at present it’s a bureaucratic nightmare to get approval. So all the Department of Labor and Employment has to do is to make it a simple, swift process with minimal requirement — just enough to stop unscrupulous managers.
Foreign direct investment was down 15 percent in the first three months of the year to $1.94 billion, from $2.29 billion in the same period in 2018.
A principal cause is Congress sitting on the proposed Tax Reform for Attracting Better and High-Quality Opportunities (Trabaho) Bill. A businessman won’t put money into a business when he doesn’t know what taxes he’ll pay and what incentives he’ll get if he comes here.
There are many other fundamentals that need to be changed, too, but let me focus on just some current ones the 17th Congress didn’t get around to finishing. The 18th Congress could do the job, and quickly — if it wants to.
- Tax reforms I’ve mentioned. The package of four tax measures needs to be top of the list to send to the President.
- Amendments to the Public Service Act, which narrows down “public utilities” to transmission and distribution of electricity, and waterworks and sewerage pipeline distribution systems. This way, majority foreign ownership can be attracted to other sectors serving the public. Coupled with that is—
- The Foreign Investments Act, which needs to lower foreign investment and employment thresholds.
- The Build-Operate-Transfer (BOT) Law, which needs to allow other forms of public-private partnership. This should hasten the construction of desperately needed infrastructure in the country.
- Amendments to the Retail Trade Act to lower the entry level for foreign retailers to $250,000.
- The Freedom of Information Act, which is needed to improve transparency in government transactions and raise the Philippines’ global anticorruption ranking—a major consideration for foreign investors when choosing where to invest.
- Emergency powers to declog Edsa and to hasten infrastructure construction in major cities across the Philippines wouldn’t hurt either. If you’ve ever spent two or three hours traversing Edsa, you’d agree.
I have a far-out suggestion for Congress: Work together when it comes to business matters. Hold joint committee meetings that include businessmen, labor leaders, administration officials, even selected members of the public, to thresh out all the issues in marathon sessions to get things decided—fast.
If our politicians truly want to oversee a vibrant, successful country, they’ll focus on making it easy and competitive to do business here. So tackle those seven bills within the first days of session—and pass them within a month.
Give Filipinos jobs.
E-mail: wallace_likeitis@wbf.ph