Investments, local and foreign, are like pools of water
flowing down. They go where they are allowed and welcomed, not where they are
restricted and barred. So government and national policies set the tone and
signal if they welcome, partially disallow, or explicitly restrict investments.
Foreign investments are particularly very mobile and
flexible. They can come and go in major cities in the world in very short
period like within hours or minutes, such as investments in the stock markets
and commodities.
Foreign direct investments (FDIs) are for long-term
engagement. Once they have decided to come or skip a country or economy, there
is little flexibility left because the sunk cost of putting up a factory,
hotel, or power plant is huge. It is this type of long-term foreign and local
investments that a developing economy like the Philippines should attract and
welcome, not restrict and discourage.
The Philippines is not exactly a good haven for FDIs
mainly because of the restrictions and the unwelcoming tone of our Constitution
where many sectors are outrightly banned to FDIs (media, hospitals,
universities, electricity distribution, etc.) or allowed but only up to 40%
maximum in total equity investments. Socialist Vietnam has overtaken the
Philippines more than two decades ago in attracting FDIs while late-comer
Myanmar is trying to catch-up with us, attracting some investors restricted by
the latter (see Table 1).
Notice in Table 1 the huge jump in FDIs under the past
Benigno S. C. Aquino III administration, almost double compared to the amount
attracted by the earlier Gloria Macapagal Arroyo administration.
In terms of accumulated and net inward stock (inflows
less outflows of capital) of FDIs, the past Aquino administration has more than
doubled the stock in just five years, from $26 billion in 2010 to $59 billion
in 2015. Cambodia and Laos have also experienced this more than two times
expansion in FDI stock in just five years, but at a lesser magnitude or volume
of capital.
Note also the huge volume of FDI stocks in our neighbors
in the region, especially Hong Kong, China, Singapore and Indonesia (see Table
2).
Expanding the country’s productive capacity via increased
infrastructure will be one of the panel discussions in the forthcoming
BusinessWorld Economic Forum, July 12, 2016 at Shangri-La BGC. The role of
foreign investments, finance, and technology cannot be underestimated
especially in high capex sectors like telecommunications and power generation.
The speakers in the afternoon panel on that day will be
Mr. Ernest L. Cu, President & CEO of Globe Telecommunications; Mr. Eric
Francia, President & CEO-Ayala Corporation Energy Holdings, Inc.; and Mr.
Erramon Aboitiz, President & Chief Executive Officer, Aboitiz Equity
Ventures, Inc.
There are a few big challenges for the new Duterte
administration to sustain the momentum of high interest in the Philippine economy
by foreign investors.
One is to remove the restrictive provisions of the
Constitution and allow 100% foreign equity ownership except in land, something
that he promised during the campaign period. This will require changing or
amending the 1987 Constitution.
Two, to reduce business bureaucracies, local and
national, that discourage many foreign investments even in sectors that they
are allowed like power generation. This is already included in the 10-point
agenda that his economic team has announced middle of this month. This needs
serious implementation and not ningas-cogon, short-term practice.
Three, to reduce or remove various uncertainties that can
discourage investments, even if foreign investments are liberalized tomorrow.
These uncertainties include the agrarian reform program, which is always
extended, and anti-mining, anti-coal power pronouncements.
And four, to erase from the country the terrorist and
extortionist groups engaged in kidnap for ransom activities. This is a big
turn-off for foreign investors and visitors planning to come to the country.
Bienvenido S. Oplas, Jr. is a Fellow of SEANET and
President of Minimal Government Thinkers.
-------------
See also:
BWorld 23, ASEAN trade bureaucracies and Doing Business 2016 Report, November 07, 2015
BWorld 61, 100 indicators better than GDP, June 03, 2016
BWorld 68, Criminal justice and Duterte, July 07, 2016
No comments:
Post a Comment