The good news is that pledges by foreign businessmen to set up shop or expand operations in the Philippines’ special economic zones are up compared to where these were a year ago. The bad news is that the fund commitments are, so far, nowhere near the target set by the Philippine Economic Zone Authority (Peza).
Latest data show that these investment pledges for the first nine months of 2014 grew by 6.2 percent to P148 billion, from the P139.6 billion promised by investors in the same period last year. But with only three months left in the year, these promised investments—never mind actual ones made—are only half of what Peza had initially expected for the entire year.
Barring a dramatic change of heart that would see foreign businessmen suddenly come running in the fourth quarter, the growth in our special economic zones this year will likely be muted. Not bad, but nothing to crow about. (Peza investment figures mirror those one would see in the broader economy. Last year, the Philippines received $3.8 billion in foreign direct investments—an amount impressive in itself but paltry when juxtaposed with economically underdeveloped Vietnam’s $8.9 billion in FDIs in the same year. And let’s not even talk about Malaysia. This Asean powerhouse received over $12 billion in FDIs in 2013.)
Note that we are talking about Peza—one of the most competent, professionally-run and red-tape-free agencies in the government bureaucracy, headed by the well-regarded Lilia de Lima. If the best local business climate—artificially sustained in a physical, legal and regulatory bubble to protect investors from the pain of the “real world” Philippines—can manage only single-digit growth, what hope of growth do we have for the rest of the businesses?
Everyone knows what ails the local scene and what is needed to make the Philippines an attractive place for business. Everyone knows that the “ease of doing business” is a perennial complaint of both local and foreign businessmen. Companies want to be able to start operations after gathering 20 signatures and permits from government officials and regulators, rather than over 100. Businessmen want electricity. They want supply to be reliable so that they can turn on the machines in their factories and not worry about rotating outages. And they want electricity to be affordable, enough for them to make goods sufficiently cheap to compete with those made in China, and still leave them a decent profit. Businessmen want contracts respected. They want assurance that deals made today will be upheld for the next 20 years, and not overturned when a new administration comes in, like what will happen in two years.
But there is hope. It rests in the hands of President Aquino, who has used his still considerable political capital rather sparingly—almost like a miser—when it comes to issues involving the economy and the local business community.
We understand that the priority of his administration is to improve the lives of Filipinos through a dogged commitment to good governance. But leaving business and the economy to do battle against the bureaucracy and the forces of the status quo is dangerous. Failure to keep the economic engine running will ultimately mean less food on the table for more and more Filipinos, which will certainly undermine the gains of “daang matuwid.”
To ensure that this does not happen, the President needs to employ some of his political capital to make the local climate more business-friendly to small entrepreneurs or large corporations, Filipino-owned or foreign. This political capital can be used to trim bureaucratic red tape. It can push Congress to enact laws that promote rather than penalize industries that can generate jobs and promote inclusive growth. It can be used to head off disastrous experiments like the recent truck ban in Manila that sent dangerous ripples across the economy. Most importantly, it can shorten the approval time needed for the construction of new roads, airports and power plants, or the expansion and improvement of the rail transit system.
There lies the elegant simplicity of the President using his political capital to move the economy forward: In their quest for profit, local and foreign businessmen are actually eager to solve some of the country’s pressing problems. All the President needs to do is to stop the bureaucracy from blocking their way.