Act on the facts
I’ve always believed that you make better decisions when you face facts. Let’s start with this headline in BusinessWorld last Sept. 5: “Philippines found among most restrictive.”
The OECD (Organization for Economic Cooperation and Development) says the Philippines is the most restrictive among 64 developed and developing economies. That is not a fact you want to hear if you are the leader of that country. But it’s a fact the leader should accept, even welcome, so he can use it to force the rapid removal of those restrictions.
President Aquino will be in Europe on Sept. 13-20 to encourage investment in the Philippines. When he returns he’ll announce great success, with large levels of investment promised, even committed.
He has made a number of trips overseas in the past four years, enough trips and enough time to see some results. So what are the facts?
The President has made three trips to Japan. Let’s skip last December. The earlier two resulted in promises of $4.6 billion. The result to date: only $951 million, not much more than what came in ($824 million) in just one year (2007) under Gloria Arroyo.
It was the same for the trips to the United States—three visits with around $3.7 billion promised, but only $779 million has come in.
During his visit to Australia and New Zealand in October 2012, some $830 million in investments was promised. But only a dismal $3 million has actually flowed in from the two countries in 2013, and $19 million for the first five months of this year.
To summarize, the President has made 30 trips to 17 countries. But in the past three years only a total of $9 billion has come in.
So the fact remains that during the period 2011-2013, the Philippines was still attracting the lowest level of FDI (foreign direct investments) among the major Asian economies. In that period, China received $975 billion in FDI, Singapore $175.4 billion, Indonesia $56 billion, Malaysia $36.4 billion, Thailand $27.4 billion, and Vietnam $24.7 billion. Almost thrice the FDI in the Philippines.
The trips are not achieving the desired result. The question should be asked: Why?
If the President seriously wants to create jobs, the first and biggest thing he needs to do is to level the playing field and make foreigners feel welcome by removing constitutional limits to foreign ownership, for which not only foreign but also Filipino businessmen have been clamoring. After all, you go where you feel welcome. His opposition to this is impossible to understand. Easing foreign ownership restrictions in key economic sectors is important if the Philippines is to shift from a consumption-led economy to one that is driven by investments and exports. An economic growth anchored on investments and exports is more inclusive and has greater capacity to provide livelihood and jobs to Filipinos. And it must happen if the Philippines is to join the TransPacific Partnership trade deal.
And then there are the dozen issues ever so frequently raised that they hardly need repeating, only addressing and correcting. But to remind the President, here are the top issues:
• Corruption. In this area we give him much credit, and there’s been improvement in the Philippines’ anticorruption ranking. It is now near the upper half (53 percent) of the countries surveyed by Transparency International; it was in the bottom quartile (77 percent) in 2009. He’s put great effort into fighting corruption, but it still proliferates throughout the government, particularly within local governments. Some definite, very positive achievement, but there is so much more to do. It is deterring investment.
• Inadequate infrastructure. The public-private partnership program is finally beginning to take off, but government spending is still woefully slow and insufficient. It just isn’t happening at the speed or the scope needed, as anyone caught on NLEx could tell you.
• Improvements in tax regulations. Congress’ support here is necessary, and promised (the review is being done at committee level), but attention from the leader of the country would accelerate progress. Tied into this are the tax rates, the highest in Southeast Asia. There’s a false belief that a high rate results in high levels of income for the government. It doesn’t. There are numerous examples where lowering tax rates increases government revenues. A much higher value-added tax rate (tax when you spend) accompanied by a much lower income tax rate (don’t pay when you earn) makes considerable sense.
• Hopelessly inefficient bureaucracy. The 165 signatures and two-three years required for approval to build a power plant say it all.
I’d add to those top issues the ones I often hear about: consistency of policies and sanctity of contracts—both violated in this administration (and previous ones). And the ill-thought-out security of tenure. If you can’t fire, you don’t hire. If you can’t fire, there’s no reason to work harder and more efficiently. You can’t compete.
I could go on and on. And I have ever so frequently done so in the past 30 years. It seems to fall on deaf political ears. Promises are made, action doesn’t happen.
The Philippines is doing much better in many areas, but not in those areas mentioned. The result is, no one comes. It gets the least FDI among the major Asian economies. According to Social Weather Stations, some 11.8 million Filipinos don’t have jobs, or have insufficient jobs, and an estimated 12.1 million households are mired in poverty. These are the facts. Time to act on them, not pretend that things are doing just fine.
It’s time to get angry, Mr. President. Face facts, and demand action.
(The FDI data come from the Bangko Sentral ng Pilipinas, Philippine Communications Operations Office, United Nations Conference on Trade and Development, and World Bank.)
