Economic diplomacy
President Marcos Jr. brought home $14.36 billion in investment pledges during his first official foreign trip last week to Indonesia and Singapore. Once realized, the 10 letters of intent and 12 memorandums of understanding (MOUs) signed in renewable energy, data centers, e-commerce, broadband technology, government housing, and agriculture will be a big help to the country’s economic recovery from the impact of the COVID-19 pandemic. Among others, the President saw $822 million worth of commitments in textiles, energy, technology, and agribusiness, and $7 billion in infrastructure for unsolicited private-public partnerships (PPPs). In Singapore, the President secured a total of $6.54 billion worth of foreign investment pledges capable of generating 15,000 jobs.
There is more to Mr. Marcos’ first official foreign trip than these investment pledges and commitments in noneconomic areas such as defense and cultural relations. The state visits starting with neighboring Indonesia and Singapore indicate the administration’s strategy of fueling the economy with foreign investments. This was the same game plan adopted by the late President Fidel V. Ramos, considered the country’s top salesman given his numerous foreign trips during his term. Ramos saw the Philippines returning to the radar of foreign investors by acting as the country’s chief salesman. Investors were particularly attracted by his administration’s push to modernize public infrastructure through the expanded build-operate-transfer law.
This strategy is also made imperative by the difficult economic times the Philippines is in. For the current administration, the primary reason for turning to foreign investors is obvious: the government does not have enough money as it is burdened with a ton of debt — about P13 trillion as of the last tally — due to the COVID-19 pandemic borrowings. Given its tight fiscal space or lack of funds, the Marcos Jr. administration has already decided to tap more private-sector participation in its infrastructure build-up plan via the PPP so that tycoons’ deep pockets can bankroll the projects. But even private corporations are struggling to invest in the long list of essential but long-gestating infrastructure projects the country needs due to the pandemic, add to this the fact that rising interest rates globally have been raising investment costs.
Compared to previous administrations, however, Mr. Marcos enjoys one big advantage, even over Ramos, whose economic diplomacy was constrained by constitutional restrictions on foreign ownership in many local industries. In contrast, the climate for foreign investors has never been better, which the Marcos Jr. administration should take advantage of. While former president Rodrigo Duterte may not have been a good economic diplomat, he was instrumental in relaxing the barriers to the entry of foreign capital. He signed last March the law amending the 85-year-old Public Service Act. Considered a game changer, the law now allows full foreign ownership of companies in select industries such as telecommunications, airlines, and railways. Duterte also signed Republic Act No. 11647, which amended the Foreign Investments Act of 1991 by relaxing the list of economic activities that foreigners were barred from entering. The Retail Trade Liberalization Act of 2000 was likewise earlier amended by lowering the required paid-up capital for foreign retailers.
There is one important point to consider though in all the investment pledges that heads of state bring home with them after embarking on state visits. This was highlighted by Mr. Marcos in his arrival speech from Singapore when he assured Filipinos that the government will work hard to bring all of the investment proposals to fruition. “We are all now going to bend ourselves to this work. We will not stop until we can come back and say that these MOUs that we have started, these letters of intents that we have started, already have their desired results,” he vowed. But for Mr. Marcos’ diplomatic diplomacy to work, he must adopt a whole-of-government approach in luring foreigners to put their money here. That is exactly what Ramos did. As recalled by his socioeconomic planning secretary and now Inquirer columnist Cielito Habito, Ramos instructed embassies, consulates, and honorary consuls abroad to give greater focus on economic diplomacy. Foreign missions, he said, were directed to put more of their energies and resources into seeking and seizing opportunities for increased trade, tourism, investment, development assistance, and even economic intelligence.
If Mr. Marcos plays his cards right in the economic diplomacy field, his administration can easily breach the previous regime’s estimate of seeing $10 billion in annual foreign direct investments to be drawn into the country by recent economic liberalization measures. He must, however, engage the entire bureaucracy in this, lest those billions of dollars worth of investment pledges will remain as they are — mere promises.
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