Investor confidence soared in 2013 on the back of perceived significant improvements on governance, intensified drive against corruption, the country’s favorable and robust economic performance, as well as the ratings upgrade granted by credit-rating firms. AP FILE PHOTO
MANILA, Philippines—To say it was a good year for trade and investments is an understatement.
Investor confidence soared in 2013 on the back of perceived significant improvements on governance, intensified drive against corruption, the country’s favorable and robust economic performance, as well as the ratings upgrade granted by credit-rating firms.
Such developments were reflected in the numbers, whether in terms of a rise in the investment pledges of both local and foreign firms, the number of trade missions pouring in the country, and the significant jump in rankings in the various global competitiveness surveys released in 2013.
More notable, however, is the relative “ease” in swaying investors to look at the country as a lucrative site for new businesses or expansions.
As one trade official put it, the government no longer needs to “beg” for time from investors to take a second look at the Philippines.
Even Trade Secretary Secretary Gregory L. Domingo remarked that 2013 was “almost too good to be true,” save for some hiccups that diverted government and private sector resources to relief and rehabilitation efforts.
‘Distracting’ events
“The year 2013 was very good economically as far as trade and investments were concerned, but was distracting because of many events and developments including the spillover effects of Typhoon Pablo [in 2012], the Zamboanga standoff, the 7.2-magnitude earthquake in Bohol, Typhoon Yolanda and the priority development assistance fund (PDAF) issue,” Domingo explained.
It’s not that these reduced potential for further growth, Domingo said, but these events were “distracting” because the focus was diverted.
“Of course that was appropriate. We really needed to divert our attention to save lives. But this had a huge impact on businesses because a lot of the logistics capacity were taken up by relief efforts,” he added.
In a separate interview, Trade Undesecretary Ponciano C. Manalo Jr. pointed out that the good governance measures implemented by the Aquino administration have been the driving factor in the upgrades from major global ratings agencies and the rise in competitiveness rankings in 2013.
“Business and economic reforms introduced by the government are now starting to be institutionalized which should bring even more confidence from global investors to locate in the Philippines,” Manalo explained.
Even local and foreign business chambers are lauding the current administration for the notable reforms that were implemented in the first three years of President Aquino’s term.
Henry Schumacher, vice president for external affairs of the European Chamber of Commerce of the Philippines (ECCP), noted that the Aquino administration had “done well” in 2013 by addressing corruption and supporting a number of tax measures through Congress, such as the Sin Tax Law and the Law eliminating Common Carriers Tax and Gross Philippine Billing for passengers.
The administration, Schumacher pointed out, was able to achieve rating increases and “nurture” the country’s economic growth (GDP).
John D. Forbes, senior advisor at the American Chamber of Commerce, similarly noted that the “high economic growth rate achieved in 2013—despite weak growth in major external markets—demonstrated the positive results of the administration’s reforms over the last three years.”
“Increased spending on infrastructure, improved budgeting procedures, targeted improvements in low-ranked indicators in global ratings, growing international tourist arrivals, more PPP projects rolled out than ever before, initiation of improved educational and public health programs, and CCT, are among the significant reforms,” Forbes said in a separate e-mail.
The Philippine Chamber of Commerce and Industry also acknowledged that the local economy had been growing faster than forecasts, which demonstrated the resiliency of business conditions in the Philippines, PCCI president Miguel B. Varela earlier said.
Varela had said that the Aquino administration’s “Daang Matuwid” program had been an inspiration for the business community to cooperate with government. This had also paved the way for investor confidence to return and further improve as companies doing business in the Philippines have experienced a decline in incidences of corruption in public contracts.
But such reforms are obviously not enough.
While the local economy continues to gain, the benefits do not trickle down to the grassroots where these are most needed.
Limited progress has been noted in many critical areas, which should be addressed to effect lasting gains for the country.
‘More work, less talk’
Sentiments of the business groups also boiled down to this: more work and less talk, more reforms and less politics and bureaucracy. Decisive actions by the government are necessary more than ever to sustain the momentum gained in the first three years of this administration. Otherwise, the achievements of the past years will only come to naught.
“Less study and talk and more action are needed to sustain and increase high growth in a country with such a large and growing population,” Forbes stressed.
Forbes noted that “inclusive growth remains out of reach for this administration—as it was for its predecessors—and poverty remains far too pervasive.”
“No matter how honest or smart the national government is in the Philippines, it still operates within an environment of restrictive laws (including the economic provisions of the Constitution), a vocal media, burdensome bureaucrat traditions, a flawed judicial branch, and—as 2013 proved—Mother Nature’s worst disasters,” Forbes explained.
Schumacher, meanwhile, pointed out that “very limited progress” had been made in developing transport infrastructure.
“The extreme delays under the supervision of the Department of Transportation and Communications will haunt the Aquino Administration. Sustained economic growth can only be achieved if the supporting infrastructure is in place,” Schumacher said.
Limited success
“Another area of limited success is the failure of getting inclusive growth going and addressing the related issues of un- and under-employment and consequently the failure to address poverty alleviation. Attached to this issue is the fact that the Philippines is not getting the foreign direct investment that is needed to drive productive, long-term investment that will get people employed,” he noted.
Schumacher likewise said that the government put “too much focus on revenue generation and too little focus on why foreign investors are not investing here.”
“The issues of long-term commitment, no mid-stream changes, honoring contracts, delivering on incentives promised investors have to get higher priority,” he stressed.
The PCCI said late last year that 2014 would be a critical year for the Philippines, as it prepares for the formation of the Asean Economic Community in 2015.
Aside from the wish list it submitted to the government in October last year, the PCCI had again renewed calls for the government to address the so-called “constraints to high growth.”
“This year is a critical year to take decisive action… We could lose out to our competitors if we delay in removing the constraints that have been making us just play catch up,” Varela said in a yearend briefing held late last year.
The government, he had said, could clear the list of constraints by ensuring the adequacy and cost-competitiveness of fuel and electricity to power the growth of industries; and rehabilitating, expanding and modernizing airports and seaports to accommodate the growing number of tourists and rising volumes of traded goods domestically and internationally.
The government also has to construct roads, rails and bridges with priority given to linking airports and seaports to cities and farm-to-market roads; streamline business permits and licenses; and improve customs administration and procedures.
PCCI also stressed the need to strengthen the country’s capacity to participate in regional trading activities and improve education standards.
“Certainly, the rosy picture painted by our economic managers could result in the transformation of the Philippine economy into a powerhouse economy if the government, with the support and partnership of the private sector, is able to address the constraints to growth,” Varela had said.
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