On competitiveness

As our final exams for our Comparative Law studies at the Ateneo Law School, our group was asked to make a presentation on Vietnam, with particular focus on a number of areas such as investment vehicles, compliance with the AFTA-CEPT, legal framework. After the presentation, one of the panelists asked me a tough question: If given a choice between Vietnam and the Philippines, where should I invest and why?

I came across a Vietnamese government policy which goes as follows: In the event that a law or policy subsequently promulgated provides greater benefits and incentives than those previously given to investors, such larger benefits and incentives will automatically apply retroactively to those investors. If the changes adversely affect existing investors, the government then commits to adopt offsetting, particularly measures such as tax holidays or payment of compensation, in order to approximate the same conditions that existed before the amendments.

Being a representative of Vietnam for purposes of the class, I had to say, invest in Vietnam if only for this policy on investments.

I remember many years back when there was a big commotion regarding a Supreme Court ruling affecting business incentives for Clark. The law creating the Philippine Economic Zone Authority (PEZA) specifically mentioned that PEZA incentives are not applicable to economic zones created under the BCDA law. But the BCDA law only specified the incentives for the Subic economic zone although it authorized the President to create the Clark Special Economic Zone. The SC ruling stripped Clark locators of the incentives that they were already enjoying and this went on for at least three years until Congress amended the PEZA law to make the PEZA incentives applicable to Clark.

I always tell my Investment Law students that more than the applicable incentives, foreign investors give a lot of weight to the stability of government policies, jurisprudence, and the overall business climate.

I came across an article written by Jaime Augusto Zobel de Ayala, chairman and CEO of Ayala Corporation and a member of the National Competitiveness Council, where he outlined some of the key drivers of competitiveness and described the respective roles that the private sector and government play in building up country competitiveness.

JAZA noted that in the latest World Economic Forum report, the Philippines moved up 10 places, from 85th (of 139) in 2010 to 75th out of 142 countries in 2011, one of the largest jumps recorded by a country in worldwide.  In Transparency International’s Corruption Perception Index, we also moved up five positions to 129th compared to the prior year. However, the Philippines slipped by two positions to 136th in IFC’s Doing Business Report.

He revealed that the top three immediate challenges, as defined by the surveys, are in the areas of corruption, inefficient government bureaucracy, and inadequate infrastructure. Longer term challenges lie in the area of education, science and technology, and innovation.

JAZA then highlighted four important drivers to improve the country’s global competitiveness: firm-level competitiveness, human resources, inclusive growth, and regional competitiveness.

On firm-level competitiveness, he said that while a trusted and efficient economic system, with stable institutions and strong political, legal, and social frameworks underpin the success of an economy, they are not by themselves sufficient to sustain country competitiveness.

“These broader macro conditions are only half of the competitiveness equation. The other half lies in the micro, or firm level, of an economy where the private sector carries much of the responsibility. Companies are the entities that create national wealth and so their productivity, efficiency, and dynamism are central to country competitiveness. An economy cannot be competitive unless companies operating within it are competitive and productive,” he said.

One of the greatest long-term challenges to global competitiveness for the Philippines, JAZA pointed out, is in the area of human resources. “Our country’s general education standards, along with our science and technology education, research and development, ability to innovate, and our level of industry-academe collaboration have been rated low by investors. In a world where comparative advantage is increasingly based on human capital rather than on natural resources, we cannot afford to ignore this sector. Our ability to address new problems and the challenges of tomorrow is directly linked to our ability to raise our educational standards today,” he explained.

On regional competitiveness, JAZA emphasized that it is possible for a country to become globally competitive based on only one or two economic hubs.

“We need to build more economic growth centers across the country. This year, we plan to work with more local groups to develop suitable metrics for measuring their own competitiveness. More importantly, they need to begin to measure themselves against other cities in ASEAN,” JAZA stressed.

But he noted that ultimately, the challenge for any nation is how to sustain its competitiveness over the long term. The first thing to remember is that change is a constant. In the short-to-medium term, the competitiveness bar gets raised as one moves up in terms of GDP per capita.

The second, he pointed out, is that the whole definition of competitiveness is also evolving. It is moving in the direction of measuring sustainable competitiveness in the sense that metrics now include measuring the ability of today’s economy to grow without compromising the ability of future generations to meet their own needs, Ayala Corp.’s top executive said.

Not so hidden agenda

Film Competition launched: Maynilad Water Services Inc., in partnership with the University of the Philippines (UP) Cineastes’ Studio, is sponsoring the ThinkLiquid Short Film Competition, which dares young filmmakers to tackle issues surrounding access to clean water and the role of water in attaining a better quality of life. The top three entries will be screened and awarded during the World Water Day Festival on March 22, 2012 at The Manila Ocean Park. The grand prize winner will get P15,000 while the two finalists will receive P5,000 each. Deadline for entries is on March 20. Open to all college students, the film should be between three to eight minutes. For more inquiries, visit facebook.com/ThinkLiquidShortFilmCompetition. Interested parties may also get in touch with JM at 09173817597.   

Bar Exams: Congratulations to the Arellano University School of Law, which for the second consecutive year, has successfully landed a spot in the top 10 of the bar examinations. This year, Cherry Rafal-Roble placed number three. Last year, two Arellano graduates also landed in the top 10. I would also like to congratulate AUSL’s 123 new lawyers, especially my good friend Cris Tenorio, whose kababayans in Tanauan, Batangas, must be extremely proud.

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