* My column in BusinessWorld last February 11.
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The Philippines continues to be among the laggards in
East Asia in attracting more foreign direct investments (FDI). Data from the UN
Conference on Trade and Development (UNCTAD) World Investment Report (WIR) show
that our FDI inward stock, an indicator of cumulative foreign investments, was
still below $90 billion in 2018 and only about 55% of that in Vietnam and
Malaysia, 37% of that in Thailand. The only neighbors that we can “beat” as
having lower FDI stocks are Myanmar, Cambodia, Laos, and Brunei (see Table).
Japan is not a major destination of FDI mainly because it
is a major source or exporter of investments. And an important reason for the
Philippines’ low attractiveness to FDI is the Constitutional restrictions, if
not prohibitions, for foreign equity in many sectors and sub-sectors of the
economy.
On Jan. 29, the American Chamber of Commerce of the
Philippines, Inc. (AmCham) launched the first of Legislation Discussion Series,
focus on Public Sector Act (PSA) Amendment, held at its office in Makati City. The
speakers were Congresswoman Sharon S. Garin (Party List — AAMBIS-OWA), author
and principal sponsor of HB 78, Amending PSA; National Economic and Development
Authority Assistant Secretary Carlos Bernardo O. Abad Santos, and FEF Fellow
Dr. Joseph Emmanuel Angeles.
The Chairman of the AmCham Legislative Committee, John
Forbes, provided a good overview on why this measure is important for the
Philippine economy and why the existing law, the PSA — which was enacted in
1936 (it is 84 years old) — is a hurdle to more investment liberalization and
job creation.
Ms. Garin’s bill intends to limit the term “public
utilities” to only three sectors — electricity transmission, electricity
distribution, and water distribution and sewerage system. Thus, two sectors —
telecommunications and transportation (sea, land, air) — will be liberalized to
allow more participation by foreign equity.
As a regular traveller to Negros Occidental (my home
province) and Iloilo (my wife’s province) at least once a year, by plane or
driving by land and RORO (roll on roll off boats), I am particularly interested
to see more airline competition, at least more flights by each of the three
existing airlines flying to these big islands and provinces. I am also
interested to see more shipping competition among boats plying the
Batangas-Mindoro or Batangas-Aklan, Manila-Iloilo routes. PSA liberalization is
among the few good bills in Congress.
That same week, the Philippine Competition Commission
(PCC) also organized a “Forum on Competition in Developing Countries” on Jan.
30-31 at Sofitel Philippine Plaza. I attended only Day 2 and there were two key
speakers, Senator Sherwin Gatchalian, then Dr. Ioannis Kokkoris, Professor of
Competition Law and Economics and Dean for International for the Faculty of
Humanities and Social Sciences, Queen Mary University of London, UK.
I have discussed the speech of Mr. Gatchalian in my
previous column (see
https://www.bworldonline.com/power-security-and-competition/). Dr. Kokkoris’
lecture I found too general and a reiteration of what many people in the
audience would probably understand and advocate. Like the advantages of a
competitive market over a monopoly/oligopoly market structure.
There were five reactors to his talk and all were highly
knowledgeable on competition issues: Department of Trade and Industry
Undersecretary for Competitiveness and Innovation Group, Rafaelita Aldaba;
World Bank Senior Economist Graciela Miralles Murciego; RCBC Executive
Vice-President Lito Villanueva; Indonesia Competition Commission’s Mochammad
Hendry Setyawan; and University of Hong Kong’s Professor Thomas Cheng. They all
have contributed specific observations on the progress or limitations of
competition in their respective areas and economies. Thanks to the PCC for organizing
such a big international forum.
Of course the PCC is helpless in implementing competition
in sectors where government itself is the creator of monopolies and oligopolies
via Congressional franchise, agency franchise, or local government units (LGUs)
franchise. For example, the National Grid Corporation of the Philippines (NGCP)
is the only national monopoly in the country and it was created by a Congress
franchise. Airline routes are given by Civil Aeronautics Board, shipping routes
are given by the Maritime Industry Authority (better known as Marina), busline
or jeepney routes are given by the Land Transportation Franchising and
Regulatory Board, tricycle routes are given by local government units.
A weird thing in the country now is the insistence by the
Department of Health (DoH) to impose another round of drug price controls.
Price and brand competition is healthy for the companies, patients, hospitals,
and physicians. People are given choices whether to buy more expensive but
well-known and effective brands or cheaper but lesser well-known brands and
generics.
Forcing price controls — removing the higher prices for
certain brands — will narrow the choices and competition to medium- to
lower-price ranges. Then better-known disease-killer brands will be discouraged
from selling while those that are already selling cheap will be forced to sell
even cheaper and face possible bankruptcy.
Competition is better done by sellers as they receive
price signals from the public, not by government bureaucracies and politicians.
What products or brands to patronize are better done by the consumers, patients
and their healthcare providers, not by government bureaucracies.
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