Companies are departing China for friendlier shores. They are scared of two things: having too many eggs in one basket, so if the system fails as it did with COVID-19, production comes to a halt; and fear of attack by a politicized legal system following the crackdown against Hong Kong through a draconian, dictatorial law.
Because of this, a number firms have shifted billions of investment since March to Vietnam, India, Indonesia, and Thailand. Not the Philippines.
In an analysis of where to invest, the Philippines, too frequently, doesn’t even get a mention.
Yet my multinational clients all perform well here. None leave. Their performance matches or exceeds the performance of subsidiaries in other countries. Yet new ones don’t come.
There are a number of reasons for this, most based on practical realities. MNCs are a pragmatic lot. They look at the costs and risks of doing business, and on those Vietnam is generally ahead.
The American Chamber of Commerce, in a team led by John Forbes, did a fascinating analysis of 135 factors when considering whether to go to the Philippines or Vietnam. Vietnam was ahead in 67 factors, the Philippines in a lesser 43.
Interestingly, the primary reasons for choice weren’t cost-related, but the more fundamental one: stability, which 86 percent listed as most important. You might not like the communist-controlled political system of Vietnam, but it’s inherently stable and not susceptible to whimsical interference — as it is too often here.
Next factor, at 84 percent, was the people’s talents and skills. The World Economic Forum put the Philippines way ahead at 64th of 141 countries; Vietnam trailed at 67th. And where it really matters in this new normal — IT — the Philippines was way up there at 22nd to Vietnam’s 97th, based on digital skills among the active population. So why in hell aren’t we getting IT-related investments? There’s some serious research by the DICT, together with the DTI, needed here on this, as well as action on their part if the Philippines were to be the world leader. But with the way things are going, I fear we’re going to miss the IT bandwagon.
As I’ve argued frequently, this country must focus on IT (with agriculture) as its future in the world. Filipinos have the skills, if the educational system is geared to train them — a task the Commission on Higher Education needs to work with the DICT to more fully concentrate on.
But equally important was the legal and regulatory environment. Here, the Philippines fails. The legal system is, quite simply, dysfunctional, with little hint of improvement. However, the regulatory system is being addressed with the creation of the Anti-Red Tape Authority. The call of the President in his State of the Nation Address to digitize government will help, too, if it occurs.
There’s more, much more a short column can’t cover. But let me add two more. A negative one: taxes. Congress must, just must, shift its priorities to where it really matters—creating jobs. Not catching the yet-to-be-identified one or two terrorists in our midst. The four tax bills must become law. Vietnam captures 20 percent of one’s income, while the Philippines 30 percent. Vietnam focuses its attention on what incentives a company truly needs. Congress must act on this. Businessmen will not invest when they don’t know what tax they’ll pay. Legislators should concentrate on the laws business has long demanded. Let’s have a Congress that cares about giving Filipinos jobs.
Then there’s the positive one, and this is at the heart of my column: where to invest. CEO magazine, a magazine for CEOs throughout Asia and the Pacific, listed the Philippines as Number 7 out of 80 world economies as where to best invest. Vietnam was 23rd, yet it is getting the money and the jobs. We are not.
Let’s hire one of the world’s consultancies with the expertise to research why.
I think part of the problem is not the practical realities of where best to make money, but the political image of the country. Traveling overseas (before you no longer could), the image of the Philippines was not good when you talked to people. Until COVID-19 is fully brought under control (a year or two or three from now), let’s shift the budget for tourism promotion efforts to investment promotion in a focused manner. We need a better PR effort, to project the reality we on the ground know to the outside world that this is the place to be.
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