Attracting investments

A primary reason being cited for calling a constitutional convention is to remove the restrictive economic provisions of the 1987 Constitution. It is said that the provisions discourage direct foreign investors from coming here. Partly correct, but not the whole story.

Removing the economically restrictive provisions should help put us in the running for investor dollars. But not enough. Allowing foreign ownership of land won’t do much to help us. Investors can’t own land in Vietnam and China, but investors have flocked there.

Neither will all the attractive investment incentives in terms of tax perks convince investors to come here. The Philippines, according to Oxford Economics, is one of the least attractive destinations for foreign direct investment (FDI) in the Asia-Pacific because of our poor infrastructure and business environments.

For example, NAIA. If PNoy and Duterte only allowed the private sector consortium who wanted to fix NAIA to get the job done, we would have a decent airport by now. But PNoy, Mar Roxas, and Jun Abaya weren’t decisive enough and Duterte and Art Tugade succumbed to political pressure that scuttled the proposal of a consortium of our top conglomerates to fix the airport.

The gateway airport is important. It provides our first impression to prospective investors. If they see the mess in NAIA’s three terminals upon arrival, they might just take the next flight back home. It isn’t just the physical infrastructure. Airport security personnel and immigration officers have been accused of extortion.

Speaking of infrastructure, the Philippines lags in rail and road connectivity. Traffic congestion is a daily punishment and waste of time. Power supply is iffy and expensive. As for a digital backbone, Vietnam has more than 90,000 cell sites while the Philippines has 17,850.

Then there is the business environment. Prospective investors will look at the ease of doing business. We have an Anti-Red Tape law. But aside from creating a new bureaucracy, red tape in national and local government units haven’t improved that much.

Public officials use red tape for extortion. In comparison, the Vietnamese government is quite consistent in enforcing the rule of law. Investors know what to expect. Vietnamese President Nguyen Xuan Phuc stepped down after  taking responsibility for alleged violations committed by his ministers with regard to COVID-19 response management. Former president Rodrigo Duterte, on the other hand, defended Pharmally.

We desperately need investments in power plants. Most of our power plants are old and powered by coal that are no longer efficient nor reliable. But it takes a minimum of five years to get all the permits, national and local, to break ground for a power plant. Investors would think they can get better and quicker returns on their money by going elsewhere, Vietnam, for example.

The regulatory environment and sanctity of contracts is another big problem. Duterte unilaterally rejected the arbitration win of Maynilad and Manila Water and forced them to sign new contracts. That’s enough to scare any potential investor in long-term infrastructure projects.

Local companies also have to endure government created hurdles to investment projects. It took 10 years for San Miguel to get the go signal to proceed with both their airport and metro rail projects. Ayala bailed out of Manila Water after the Duterte experience and had been trying to bail out of the LRT 1 expansion project too. But the government needs these big conglomerates to do PPP infra projects given their tight fiscal space.

Then there is the local government. Even the lowly barangays have started to harass investors. My colleague Cito Beltran wrote about how a barangay in Batangas imposed a local tax on the entry of day-old chicks in poultries in their area. This happened at a time when we had problems with chicken and egg supplies and investors should be encouraged.

There is also this story of how a local political kingpin in the south blocked the road leading to a sugar mill of a conglomerate. Since trucks cannot deliver cane, the sugar mill grinded to a halt. The conglomerate was forced to sell to the local kingpin, presumably for a song.

And let us not talk about our justice system. It is an open secret among lawyers that ours is the best that money can buy. It takes years to get a decision. That’s scary for a foreign investor.

Then there are other things. Vietnam managed to get Intel to move its plant from Cavite because of the quality of the workforce and the workforce’s aptitude for innovation. Sure, the Filipino engineers manned the factory at the start, but Intel was looking long term. We do not produce enough good engineers, and the quality of our education has considerably declined in terms of science, math, and English aptitude.

Then there is the quality of life and personal security against crime. Our national police do not exactly inspire confidence. It needs massive cleansing from the top, which was promised but yet to happen. Investors want assurance of personal safety for themselves and their expat staff.

We have a long to-do list to attract investors, before we even talk of charter change. But removing the restrictive economic provisions will definitely improve the business climate.

For example, opening up mass media to foreign ownership will help promote our creative industries. There’s foreign capital behind the success of BTS. Also, some foreign companies with news and education websites don’t want to make the Philippines their base because they may be charged with violating the Constitution.

Same thing with education. Foreign schools have been flocking to Singapore because it doesn’t have restrictions. We could strengthen and promote our higher education sector with more foreign schools based here. The Asian Institute of Management is overdue for a strong infusion of capital and internationalization from a topnotch foreign business school.

Foreign students would still want to study here because the medium of instruction is in English and education is affordable. So why not get foreign universities to establish branches here?

Constitutional change is not a cure-all for our problems. We have a lot of homework to catch up on to get competitive even with the likes of Vietnam.

Boo Chanco’s email address is [email protected]. Follow him on Twitter @boochanco