Betting on the Philippines

FURANO – Returning to my hotel room on Saturday night in this city in Japan’s Hokkaido prefecture, I realized I had lost my smartphone. I suspected that it was while tube sledding at the Kan Kan Mura snow café.

It was dark despite the attractively illuminated ice sculptures, 8 degrees below zero and there was heavy snowfall. I was so bundled up in several layers of winter clothing I could have rolled down the ice on my frozen butt, even without sitting on the giant inner tube or salbabida.

If my nose didn’t fall off from the freezing weather, I was likely to lose personal belongings while tube sledding, so I felt pretty stupid for my loss. There were a lot of tourists enjoying winter night in the snow and anyone could have just pocketed the phone. But I thought it was a good opportunity to find out if all those stories about Japanese honesty were true.

So I retraced my path from my room at the Furano Prince Hotel, out into the snowfall again and into the café and dome made of ice, to ask the guy at the front desk if by any chance someone had found a cell phone. He didn’t speak English, but he smiled and asked, “iPhone?” Yes. Color? Black. With flap cover? Yes again. He reached for my phone, which was on top of a counter behind him, waiting to be claimed by its owner.

The honesty is no myth! I was so grateful I could have bowed to him with my head touching the ground. 

And I am so glad that our country is strengthening its ties with Japan, in economic, security, cultural and other aspects. The Japan International Cooperation Agency is conducting feasibility studies on several key transport infrastructure projects being planned by the Duterte administration, which means there’s a good chance that Japanese companies will be implementing the projects that include the Metro Manila subway and commuter train service.

Japan has had corruption scandals, but generally its culture and its professional bureaucracy put a premium on honesty and the judicious use of people’s money. 

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I am also glad that Japanese companies continue to have faith in the Philippines as an investment destination.

Last Wednesday I visited the Tokyo main office of Sumitomo Corp. Yes, the same company that was kicked out as maintenance provider of the Metro Rail Transit 3 so daang matuwid could award a multimillion-dollar sweetheart deal, no public bidding, to a group of Liberal Party fundraisers. 

However, Sumitomo isn’t discussing the MRT 3 issue. Instead, its executive officer and general manager of the logistics and insurance business division, Yasushi Fukuda, told me about their continuing bullishness over the Philippines.

Fukuda’s division is in charge of Sumitomo’s seven industrial parks in five countries outside Japan, with 484 locators or corporate tenants that employ 190,000 people mostly in manufacturing. The parks include one in Sto. Tomas and Tanauan, Batangas, that Sumitomo opened in 1996 in a 30-70 partnership with Lopez Holdings. Sumitomo also has a banana plantation in Davao.

The industrial park sprawls across an area of 450 hectares where some 50,000 Filipinos are employed. Sumitomo sources raw materials and other components from Filipino enterprises as much as possible, and is considering whether to expand to other industrial zones elsewhere in the Philippines. 

Fukuda in fact gave me a list of pluses in the Philippines that help Sumitomo attract foreign locators to the industrial park.

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At the top of the list is the Philippine Export Zone Authority, which was expertly and professionally run by the much respected Lilia de Lima until her retirement last year. De Lima has been a hard act to follow, but so far her legacy of good PEZA governance has been sustained by her replacement, Charito Plaza, according to Fukuda.

In fact Fukuda and a top executive of another Japanese corporate giant, Seiko Epson, have similar observations about PEZA and the business environment in the export zones. Junichi Watanabe, Epson’s deputy chief operating officer for wearable products and industrial solutions operations, told me in Tokyo that the Seiko Epson plant in Lipa, Batangas is now the company’s largest worldwide, with $1.29 billion in revenue last year and some 20,000 Filipino employees.

The plant, which manufactures about 200,000 projectors a month plus printers as well as watches for Seiko, opened its third factory last year in an area of 105,000 square meters. 

Both Watanabe and Fukuda cited the one-stop shop for businesses at the PEZA-run zones, which they said even China could not match. PEZA, Fukuda said, is the cleanest government agency, with no red tape and “only red carpet treatment” for investors. The two executives also pointed to the so-called population pyramid, which ensures the annual addition of about two million into the Philippine workforce for many more years. 

That workforce is proficient in English, and the country’s minimum wage is lower than in China, Indonesia and Thailand. Labor strikes are also down steeply in the Philippines.

Corporate income tax is only about a fourth of the rates in neighboring countries. There is an income tax holiday of four to eight years in the PEZA zones, and none in China, Indonesia, Vietnam and Cambodia (Thailand offers from three to eight years). Machinery and equipment can also be imported duty-free for the PEZA zones.

The operation of the Batangas Port has also been a boon to the export zones in the area, according to the two executives.

Fukuda also stresses the importance of the Philippines being a democracy like Japan, with living conditions “comfortable.”

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The Japanese do have concerns. Currently high on their list is the plan to tighten rules on contractualization. Another is the possible impact of the tax reform program on the incentives offered in PEZA zones.

And while literacy is high in the country, Epson can’t find enough Filipino employees with degrees in science and engineering. The company’s in-house skills training can only go so far, Watanabe said.

He also notes that the country is not producing enough of the raw materials and components needed by Epson, compelling the company to import items such as electronic parts and lenses for projectors. That business could have gone to Filipinos.

“We have made tremendous investments in the Philippines because we see the country as very promising,” Watanabe told me. “Our dream is to grow and prosper with you.”

The nation must not disappoint those who put their faith in the Philippines.