CAPITAL AND INVESTMENTS are like water — they go where
they are welcome and accommodated. Small water tributaries merge with others to
become a big river, a lake, or drain into the seas. In the same way, capital
congregates in areas where they are protected and allowed entry and exit with
the minimum restrictions and prohibitions.
That is how some small countries and territories with
fewer populations become wealthy and prosperous financial centers such as
Singapore and Hong Kong.
The subject of multinational corporations in the
Philippines was among the subjects discussed during the BusinessWorld-PAL ASEAN
Regional Forum last Nov. 24 at Conrad Hotel at SM MOA Complex. Session 4 was
“Investing in the Philippines: Insights from Multinational Companies” and there
were five speakers: Rajiv Dhand, regional vice-president & general manager
for operations of TELUS International Phils.; Laurence Cua, UBER country
manager; Henry Schumacher, European Chamber of Commerce senior adviser; Jericho
Go, Megaworld senior vice-president; and Alexander Cabrera, PwC Philippines
chairman & senior partner.
Almost all speakers talked about their respective
companies and their contributions to the country’s economic growth and job
creation, among others. Mr. Schumacher, being the most experienced foreign
businessman among them, provided the most direct answers to the theme. He said
that what the foreign investors are looking for, among others, are (1) safe and
secure investment locations like PEZA and other ecozones, (2) business-friendly
local government units (LGUs), partnership between LGUs and businesses.
The turn off for businesses he said, are (1) corruption
and unethical business practices, (2) no peace and order, and (3) changing
rules and policies.
The World Economic Forum (WEF) produces an annual Global
Competitiveness Report (GCR) where it measures 12 pillars of competitiveness of
countries and economies worldwide. The pillars are grouped into three major
subindices — basic requirements (pillars 1-4), efficiency enhancers (pillars
5-10), and innovation and sophistication factors (pillars 11-12). From these
three subindices, the global competitiveness index (GCI) is computed and
countries are ranked from highest to lowest.
Of these 12 pillars, the Philippines ranked badly in four
measures: (1) institutions, (2) infrastructure, (6) goods market efficiency,
and (7) labor market efficiency.
Institutions include property rights protection,
corruption and bribery in government, judicial independence, wastefulness in
public spending, burden of regulations, business costs of crime and violence,
strength of investor protection, etc.
Infrastructure include the quality of roads, ports,
railways, air transportation, electricity supply and telephone subscriptions.
Goods market efficiency cover intensity of local
competition, anti-monopoly policy, business taxation, procedures and time to
start a business, tariff and non-tariff barriers, prevalence of foreign
ownership, customs procedures, etc.
Labor market efficiency includes flexibility of wage
determination, hiring and firing practices, taxation on incentives to work,
reliance on professional management, country capacity to attract and retain
talent, female participation in labor force, etc.
Results are shown below for the two GCR reports 2014 and
2016.
Multinational corporations in the Philippines: What do
they want?
These numbers show the following:
One, Singapore, Japan, and Hong Kong are in the top 10
most competitive economies in the world, with very high scores and ranking in
infrastructure.
Two, the Philippines needs to improve efficiency and
competitiveness in these four pillars because they have pulled down the
country’s overall ranking. There was even a decline in overall ranking from
52nd in 2014 to 57th in 2016.
Three, there are lessons to learn from neighbors
Malaysia, Thailand and Indonesia which
have higher rankings than the Philippines. Vietnam and Cambodia’s overall ranks
are improving and Vietnam may soon overtake the Philippines.
In the WEF’s Executive Opinion Survey 2016, these six
factors are the most problematic: inefficient government bureaucracy,
inadequate supply of infrastructure, corruption, tax rates, tax regulations,
and Policy instability.
In short, government is mainly the problem.
There are three possible solutions here. One is to
institute huge, large-scale professionalism in government, both elected and
appointed bureaucracies, in both national and local government agencies.
Two, shrink the size and burden of government
bureaucracies, regulations and taxation.
And three is to do both, improve the professionalism
while shrinking the size of bureaucracies so that they can focus more on
enforcing the rule of law and have little time and space for creating new
regulations and taxation that tend to complicate if not contradict previous
ones.
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See also:
BWorld 97, Direction of trade of Asian economies, December 21, 2016
BWorld 98, Asian stock markets and the Duterte administration, December 30, 2016
BWorld 99, China insecurity and belligerence, December 30, 2016
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