* This is my article in BusinessWorld last January 18, 2019.
The Philippines has a huge and increasing economic
potential mainly because of its big population, estimated at 108 million as of
mid-2018 and the 13th largest in the world. Which means more entrepreneurs and
workers, more producers and consumers.
We are also an archipelago with more than 7,500 islands
and islets, lots of white sand beaches and deep fishing grounds (under Chinese
control in certain areas now, to be sure). This means huge potential in tourism
and fishery. Other countries, as we now see, are envious of coastal ones. One
of the reasons for regional and world wars is the need by some countries to
have more access to the sea, hence the need to invade and occupy their coastal
neighbors.
The Philippines, however, is not able to optimize these
potentials. Foreign direct investments (FDI), an important indicator for a
country’s attractiveness to business, is not big. In the table below, I use FDI
inward stock, the estimated accumulated FDIs in the country, and not FDI
inflows. A country may attract $50 billion a year of inflows but if outflows
are more than that, then net inflows will be negative. Data are from the UN
Conference on Trade and Development (UNCTAD) World Investment Report (WIR)
2018.
We are also not able to optimize our huge tourism
potential. Consider Macao with just 0.6 million population, yet they were able
to attract $35.6 billion in tourism receipts in 2017, while the Philippines got
only $7 billion. International tourism data are from the UN World Tourism
Organization (UNWTO) Tourism Highlights 2018.
A big reason for these not so beautiful numbers for the
Philippines is our non-friendly policies to foreign investments via
Constitutional restrictions and the 83-year-old Public Service Act (PSA) enacted
in 1936. That law has several sectors listed as “public utilities” where
foreigners are prohibited from owning more than 40% equity.
An important legislative proposal at the moment is the
PSA Amendment where telecommunications and transport (land, sea, air) are to be
removed from the list of “public utilities,” thus allowing foreigners to own
more than 50% and up to 100% equity. Only three sectors will be retained in the
list — transmission of electricity, distribution of electricity, and water
works and sewerage system. Explicit is a certain provision from Senate Bill
1754 (New Public Service Law of the Philippines) that “No other business or
service shall be deemed a public utility other than those listed in this
section.”
Two congressional bills seek to make the PSA Amendment.
HB 5828 (Amending Commonwealth Act No. 146, known as the “Public Service Act”)
was passed on third reading by the House of Representatives in September 2017.
SB 1754 remains a committee report and needs to be passed on third reading so
that a bicameral meeting may be set soon, for its enactment into law possibly
before the congressional break during the May election campaign.
More investment liberalization measures should be done,
especially airline and shipping line liberalization. Foreign investors and
their managers need to see their potential and existing projects as often as
possible. They want to see their investments here are secured and protected.
Unlike in mainland Asia where tourists and investors can travel by land, say,
from Thailand to Cambodia, Laos and Vietnam, they cannot do that in the
Philippines.
Passengers are interested to see more choices in their
domestic and international air travels. More choices in routes, days and time
of flight, and airfare.
Consumers, investors and employees will greatly benefit
from having more airline competition, with more airlines attracting more local
and foreign visitors and entrepreneurs. This will create more domestic jobs,
minimize labor migration, and fight poverty in the Philippines without the need
for more taxes and public borrowings to finance endless government welfarist
programs because many people are poor and have low-paying jobs.
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See also:
BWorld 282, CHR on ‘carbon majors’ and fossil fuels, January 20, 2019
BWorld 283, Public debt, budget deficit and sin tax hikes, January 21, 2019
BWorld 284, ‘WALANG’ forever: Universal charge in electricity and PSALM, January 22, 2019
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