Tall Task for the Next President

Tall Task for the Next President

Success is not final, failure is not fatal: it is the courage to continue that counts.

— Sir Winston Churchill

WE have a highly-skilled, English-speaking workforce, a favorable geographical location in a region that has seen the fastest growth rates in the world and efforts by the government to improve the ease of doing business in the country—and yet we stand second to the last among 14 Asia-Pacific economies in terms of attractiveness to foreign direct investments (FDIs), as ranked by the UK-based think tank Oxford Economics.

In the latest FDI attractiveness scorecard released last October 11, we were ahead only of one country—Taiwan. In first place was the behemoth People’s Republic of China (PRoC), followed by the Socialist Republic of Vietnam.

Oxford Economics blamed our low ranking due to our weak infrastructure and competitiveness for the low inflow of FDIs. We scored poorly in infrastructure and business environment, with Oxford Economics specifically ranking us in the latest Global Competitiveness Report at 92nd spot out of 140 countries in infrastructure quality.

And together with Indonesia, we also scored poorly in terms of ease of doing business. According to the World Bank’s Ease of Doing Business Report 2020, we ranked 70 or above out of 190 countries, comparing unfavorably to the advanced Asian economies and several of our regional peers.

The numbers support this assessment. Data released by the Bangko Sentral ng Pilipinas (BSP) show that we received US$7.93 billion in FDIs in 2016. This rose to US$10 billion the following year, then fell to US$9.8 billion the next. This declined again in 2019 to US$8.67 billion and, with the economic recession caused by the Covid-19 pandemic, FDI inflows shrank further to US$6.54 billion in 2020—the lowest since 2015. For the first half of this year, though, FDIs grew by 40.7 percent to US$4.3 billion.

As a perspective, the ASEAN Investment Report 2020-2021 released last September disclosed that FDIs into the Association of Southeast Asian Nations (ASEAN) amounted to US$137 billion in 2020, of which we attracted a mere US$6.54 billion. The year before that, the amount was at an all-time high of US$182 billion, of which we got only US$8.67 billion. The three biggest recipients were the tiny city-state of Singapore with US$114.2 billion in 2019 and US$90.6 billion in 2020; humongous Indonesia with US$23.9 billion and $18.6 billion, in respective years; and Vietnam with US$16.1 billion and US$15.8 billion.

Other factors may figure into why foreign investors are anxious about investing in the Philippines. After winning the 2016 elections, then President-elect Rodrigo Duterte sought to calm the business community’s fears about his blunt style of governance by laying out an eight-point economic plan to sustain the country’s growth. One of these was to attract more foreign investors by stamping out corruption to improve the ease of doing business, lifting restrictions on foreign ownership in certain economic sectors, and joining regional trade blocs.

Actually, the promise of attracting foreign investors had started way back with then-President Corazon Aquino in 1986, but she got too busy running after the Marcoses that her focus on improving our country’s economy was derailed by her obsession to make her predecessor’s family pay for their sins against democracy and the Filipino people.

Aquino was then followed by President Fidel Valdez Ramos, who likewise promised FDIs through his numerous trips abroad, which were all financed or funded by the people’s taxes. Again nothing really happened as proven by official data on the little foreign capital that was invested into the country.

President Joseph ‘Erap’ Estrada also made the same promise made by his two predecessors, still, nothing came about until Cory’s son, Noynoy Aquino, ignobly failed once more.

And now, more than five years later and less than a year before the end of the Duterte administration, the level of FDIs has remained dismally low despite measures to help attract foreign investments, including the passage of laws on fostering ease of doing business and cutting corporate income tax rates.

The truth is that these promises are doomed to failure and this is because of the big stumbling block in our government’s failure to open more economic sectors to foreign ownership. In 2016, the Asian Development Bank (ADB) already noted that the decision of foreign investors to put money in a particular area depended to a great extent on the investment policy regime and domestic regulations of the host economy.

While Congress had shown some interest by approving bills to relax the Foreign Investments Act, the Retail Trade Liberalization Act, and the Public Service Act to open more sectors to foreign ownership, none has been really passed into law.

And another major hurdle dampening foreign investor interest in the Philippines has been pointed out by former economic planning secretary Cielito Habito: the bad state of governance in the country.

The truth is that when dealing with government from the top leadership down to local governments is, investors face an uphill and rocky road that is fraught with risks and uncertainties so potential foreign investors would rather move on and look elsewhere.

This is why next year’s elections spell our country’s march to economic recovery and progress because the next administration to take over in 2022 will have the paramount economic task of turning around the failures of the past. It has to prioritize measures that would resolve all impediments and issues if it is to succeed in luring in more foreign investments and lifting the country out of its laggard status in the region.

So now, can any one of the presidential candidates do this?

(ai/mtvn)

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