How the Philippines can attract high-tech investments

Part 2

Last week, we discussed how our Asean neighbors have been busy attracting large, high-tech investments from foreign multinational companies. Below are some areas we can improve on to make the Philippines more attractive to high-quality investments.

There is good news here

A common observation is that Philippine news headlines often highlight the negative. Crime stories to political scandals usually dominate the headlines of our news reports. This is not unique to the Philippines but it feels pervasive and, unfortunately, this shapes public perception and sentiment.

READ: How the Philippines can attract high-tech investments

This may not necessarily reflect journalistic intent to spread negativity, but perhaps more of a response to audience demand and engagement metrics. Stories about corruption, natural disasters, and social issues may attract more viewer or reader interest.

Bad news can overshadow positive developments and achievements happening across the country. Accordingly, our media should incorporate more inspiring stories of community resilience, innovative startups, and cultural milestones, in order to balance out the usual sensational and grim news.

Safety & Security

On July 18, 2024, the article “The 10 Most ‘Risky’ Cities in The World Have Been Revealed for 2024” was published by The Independent, a British online newspaper.

Manila, Philippines was ranked as the 5th most risky city in the world.

According to the article, the study and rankings were based on the Forbes Advisor report and addressed to tourists. The study compared 60 international cities on seven risk categories, including crime, personal security, health, infrastructure, natural disaster and digital security to create a travel safety rating.

The top 10 risky cities cited were:

1. Caracas, Venezuela – 100 risk score
2. Karachi, Pakistan – 93.12 risk score
3. Yangon, Myanmar – 91.67 risk score
4. Lagos, Nigeria – 91.54 risk score
5. Manila, Philippines – 91.49 risk score
6. Dhaka, Bangladesh – 89.5 risk score
7. Bogota, Colombia – 86.7 risk score
8. Cairo, Egypt – 83.44 risk score
9. Mexico City, Mexico – 82.43 risk score
10. Quito, Ecuador – 82.02 risk score

While the report focuses on tourists, foreign investors will surely think twice about investing as their personnel may hesitate to relocate to the Philippines.

Electricity / Power Prices

Another obstacle in attracting investments is the relatively high cost of electricity of the Philippines, particularly in the manufacturing sector. Technology investments in the field of data centers and artificial intelligence are also energy intensive which makes the price of electricity a factor by multinational companies when considering the location as to where to invest.

Unfortunately, among Asean countries, the Philippines’ electricity prices per kWh is one of the highest, second only to Singapore.

Wages

In an interview last year at the Laging Handa Public Briefing, Employers Confederation of the Philippines (ECOP) President Sergio Ortiz-Luis Jr. stated that based on data by the National Wages and Productivity Commission, the Philippines’ $10.14 daily minimum wage rate is second only to Malaysia with $11.16 as of August 2022. Indonesia is third highest with $10, followed by Thailand’s $9.23 and Vietnam’s $6.6. Singapore has no legislated minimum wage.

Of course, this is little consolation to Philippine workers as even with the yearly increase in the minimum wage, they find it a struggle to make ends meet.

Accordingly, tempering the wage rates in the country must come hand in hand with managing the cost of living and goods the government and employers must ensure that our workers will earn a “living wage”, or that which is sufficient to cover living expenses.

Internet Speed and connectivity

In today’s business world, internet connectivity and speed are no longer just conveniences, they are critical to success considering that digital transformation is quickly sweeping across all industries.

Our fixed broadband speeds are still behind that of our ASEAN neighbors. That having been said, we have made progress in improving connectivity and our internet speed. It may be just that our neighbors have also improved their internet infrastructure which means that we must continue to improve our internet connectivity and speed in order to stay competitive.

(Fixed Broadband Download Speed in Mbps across Asean Countries, Jan-May 2023/ www.dict.gov.ph)

(Fixed Broadband Upload Speed in Mbps across Asean Countries, Jan-May 2023. www.dict.gov.ph)

Ease of Doing Business

The ease of doing business in a country is a critical factor that influences investor decisions on whether to invest their capital and money in a country. The concept includes regulatory environment, efficiency of government services, and overall business climate within a country.

In this aspect, the Philippines unfortunately lags behind its Asean counterparts as Singapore, Malaysia, Thailand, Brunei, Vietnam and Indonesia have a higher index score than the Philippines.

(Ease of doing business (EODB) in Asean countries in 2020, by index score. www. Statista.com)

While there are surely many more areas we can address, improving on these aspects will make the Philippines more attractive to investments.

(The author, Atty. John Philip C. Siao, is a practicing lawyer and founding Partner of Tiongco Siao Bello & Associates Law Offices, an Arbitrator of the Construction Industry Arbitration Commission of the Philippines, and teaches law at the De La Salle University Tañada-Diokno School of Law. He may be contacted at [email protected]. The views expressed in this article belong to the author alone.)