DAVAO CITY, Philippines—Despite the glowing statistics on the economy, the Philippines should push harder to improve the country’s investment climate as it continues to lag behind neighbors in Asia, a Japanese diplomat said here.
In a pointed assessment of the country’s economic stature in the region, Minister Akio Isomata of the Japanese Embassy’s economic section said the Philippines “cannot afford to be complacent” amid the optimism generated by its standout growth rate of 6.6 percent in 2012.
“Yes, it’s lagging behind. You cannot afford to be complacent in your current place. Of course, the economy is very strong now. The achievement, performance is admirable in the last two years I think. No doubt about that,” Isomata told reporters here Thursday night.
He cited a congested logistics infrastructure, including roads and ports, expensive and unstable power supply and the delayed release of tax refunds as major concerns among Japanese investors.
“You can’t just sit there; you cannot afford to be too complacent about that. And now is the chance because the investors, the donors, are looking at the Philippines right now, so this is the chance to do something. This is the best time to do something,” he said.
Japan has been a leading economic and development partner of the Philippines, with a number of Japanese companies operating around the country, and the largest source of official development assistance, with $593.3 million or P24 billion in aid disbursements (both loans and grants) in 2011, according to the Organization for Economic Cooperation and Development.
This accounted for 40 percent of total ODA disbursements that year, the largest slice of the pie, ahead of the United States’ $541.3 million or P22 billion.
Japan is the country’s top export market and leading trading partner, accounting for around $13 billion or P528 billion in total bilateral trade last year, and with around P22.35 billion in investments in the first half of 2012, according to figures of the Department of Foreign Affairs.
Cooperation between the two countries is anchored on the Japan-Philippines Economic Partnership (JPEPA), which aims to liberalize and boost trade between the two countries, encourage investment through an improved business climate here and advocate transparency in government procurement, among others.
Isomata reiterated concerns the Japanese Embassy aired during the Philippine Development Forum held in February here, a meeting that brought together the country’s economic planners with international donors and investors. The plenary sessions where Japan raised these issues was not open to media coverage at the time.
Outlining these current hurdles, Isomata said implementation of ODA projects remains slow while the utilization and maintenance of aid-supported projects—major roads and ports for instance— remain low.
One example is the “underutilization” of the Subic-Clark-Tarlac Expressway and the Batangas and Subic Bay ports, projects that were supported by Japanese ODA.
“What the Japanese government raised in the Philippine Development Forum: first is speedy implementation and, secondly, try to utilize the existing infrastructure. Of course we help the Philippine government build infrastructure but there’s existing ones like the two ports in Luzon,” Isomata said.
“The Manila port is already getting congested. So we started, we helped the construction of the Subic Port. And we also did the same in Batangas. But those two ports are underutilized. And although the Manila port is already congested, they’re still trying to use it,” he said.
He also cited the poor maintenance of ODA-funded projects, a weak point of the Philippines that Japan is also aiming to help through the provision of technical support.
Japanese Ambassador Toshinao Urabe pointed this out in an interview on Wednesday. He remarked that once infrastructure has been finished, “people just try to run it down.”
Urabe said his government has offered to help the Philippines in planned repairs of EDSA through proposing the use of a roadwork method that “makes minimal disruption” of traffic.
Congestion at such major roads and logistics hubs leads to economic loss, said Isomata.
“There’s so much congestion in Manila and the economic loss for that is huge. The solution is in the hands of the Philippine government, how to solve this issue,” said the embassy minister.
Japan has also called the Philippine government’s attention to the issue of congestion and even more concerns through the JPEPA subcommitte on the improvement of the country’s business environment, which gathered officials from both sides in March and September last year.
The Japanese side is hoping for the timely release of Value Added Tax refunds to Japanese companies in economic zones and a stable and affordable power supply, whose current rates are known to be the most expensive in Southeast Asia.
“We’d like to see stable supply of electricity at a reasonable price for inviting more investment from Japan. And that’s a very serious concern for Japanese locatoers here in the Philippines. I think for the time being it’s still OK. But I’m not sure [what would happen] in 2015, 2016 if we do nothing now. The price is exorbitant right now,” Isomata said.
Isomata also called for the “upgrade of the treatment” of people in government.
“You know, if those people are underpaid, it’s very hard to dispense their responsibilities as they should. We didn’t say the pay is too low but in order to mobilize better the bureacracy, there has to be some raise,” he said.
The subcommittee is due to meet again this summer but dates have yet to be set, Isomata said.
Akihiro Ushimaru, President of the Japan Chamber of Commerce in Mindanao, cited power supply and infrastructure as major concerns for his fellow Japanese investors.
“Mindanao is facing a power shortage. That’s why if possible, if we can request to the government of the Philippines better infrastructure, such as roads and powerplants,” said Ushimaru, executive vice president of Nakayama Technology, a 1,300-man plant in Digos City which manufactures and exports insulated brick and granite wall panels to Japan.
With his firm now looking to expand at its Digos site, Ushimaru however says it is still “good to invest” in Mindanao, citing his hard-working Filipino staff.