Challenges face Philippine trade, investments

MANILA, Philippines – Economic restrictions, poor infrastructure and bureaucracy remain the major concerns pulling back Philippine trade and investment from reaching their full growth potential, according to a report by the Nordic Business Council Philippines (NBCP).

In its 2016 country report of the Philippines, NBCP identified key challenges that continue to affect the country’s competitiveness as a trade partner and investment destination.

Topping the list are the economic restrictions in the 1987 Constitution which limit foreign participation in several industries.

 “Take for instance Art. II, Sec. 19 that mandates a self-reliant and independent national economy effectively controlled by Filipinos, which paves the way for several government regulations, laws, and orders that restrict foreign investors. For example, it allows only 40 percent foreign equity share in mining, agriculture, forestry, and transportation related undertaking while zero percent foreign equity share in media,” the report read.

As a result, the NBCP said the Philippines for decades has been lagging behind with ASEAN-6 peers in terms of attracting foreign direct investments.

Another concern cited is infrastructure, an area in which the report said the Philippines had underinvested over the last 10 years, limiting the country’s growth potentials with an average allocation of two to three percent of its GDP.

“Challenges in airports, power, roads, seaports, and telecommunications are evident that affected the overall performance of the Philippines,” NBCP said.

The report also cited bureaucracy and corruption as economic stumbling blocks for the Philippines.

“Due to repetitive, complex, and often conflicting orders and procedures of government agencies on business permits, licensing, entry approval, and an array of regulations, investments are delayed and foreign investors are discouraged,” the NBCP said.

Given that these challenges remain, the report, however, said the government under the current administration has taken steps to address these concerns.

“Considered to be the rising tiger of Asia after posting robust economic growth for the past five years backed by strong macroeconomic fundamentals, the Philippines aims to attract foreign investors on various sectors and industries. Investment opportunities are further boosted with government incentives on priority areas as identified in the IPP 2014-2016,” it said.

Among the local industries mentioned in the report that boast of opportunities for investments are information technology and business process management, renewable energy, construction and infrastructure, healthcare, and manufacturing.

NBCP is an organization that promotes and facilitates trade, commerce, industry, and investment between the Philippines and the Nordic (Denmark, Finland, Iceland, Norway, Sweden) and Baltic (Estonia, Latvia, Lithuania) countries.

Total external trade relations of the Philippines with the Nordic region reached € 502.69 million in 2014.

The Nordic countries exports to the Philippines amounted to €314.40 million led by Finland with € 104.67 million and followed by Sweden with €83 million.

Imports, on the other hand, was at €188.30 million, driven primarily by Sweden and Finland.

Total trade of Baltic countries with the Philippines, meanwhile, reached €12.35 million in 2014.

Total exports stood at €4.24 million with Lithuania’s sugar commodity contributing the bulk of the amount at €3.62 million, while total imports was €8.12 million also primarily driven by Lithuania.