Attracting investors

Investors, local or foreign, look for the same things. What are the prospects for making money in a country, how easy or difficult is it to do business there, and is it politically stable.

Our officials and bureaucrats make noises about attracting investors, but our neighbors in ASEAN are doing a better job. That’s because we have this anti-business attitude ingrained in our culture. It turns off potential investors because, after all, we are not the only game in town.

Indeed, even among our own conglomerates, most, if not all of the top ones have been investing overseas. For some it is a matter of seizing opportunities, for others it is to spread out their country risk and for some, it is because they don’t feel welcome in their own country.

A good example is the largely negative attitude of the P-Noy administration towards Metro Pacific. It drove MetroPac to seek prospects elsewhere in the region.

As a result, MetroPac is now invested in various infrastructure projects from power plants to toll roads and water supply in Singapore, Thailand, Indonesia and Vietnam. P-Noy drove away capital to build infrastructure we  badly need.

Maybe things have changed. Otherwise, why should our economic managers bother with an investment roadshow in London last week?

Economic Planning Secretary Ernesto Pernia honestly spelled out why we have a difficult time attracting foreign investors:

“Compared with our neighbors, the Philippines seems to be the most restrictive in terms of foreign direct investments. We have many negative-listed investment areas and activities, meaning there is a high restrictive wall on the participation of foreign investors.”

Honest Ernie told businessmen in the United Kingdom:  “We hope to boost foreign investments in the country by means of lifting or easing such restrictions.”

But we have been saying the same reassuring promises to make our country friendlier to foreign investors. I am sure investors in the audience the economic managers tried to convince in London have heard all those reassurances many times before.

Frankly, I wonder why potential investors even attend our investment roadshows. We have been wasting their time. Our officials are unable to deliver on the promises made in past roadshows. Ease of doing business has not progressed enough and legal restrictions on foreign investors are nowhere near being lifted.

A recent presentation of former finance secretary Gary Teves before the Management Association of the Philippines emphasized the urgency of action.

“Lifting the economic restrictions will make the Philippines more competitive with ASEAN peers in terms of attracting foreign direct investments (FDIs). While the Philippines attracted a record $10 billion FDIs in 2017, we still pale in comparison to Indonesia and Vietnam whose FDIs reached $22 billion and $14 billion, respectively.

“It will also accelerate agricultural development by allowing new capital and technology to improve the sector. There are studies showing a positive relationship between opening agricultural land to foreign ownership and improving agricultural productivity. More

FDIs in agriculture will create jobs in the countryside, improve productivity, lower food prices, and bring down poverty incidence.

“When the restrictive economic provisions are removed, foreign investors can participate in infrastructure projects, which will increase competition and result in more public welfare benefits, such as freed up government resources going to other priorities like education and health. It will also avert over-reliance on foreign loans and help maintain our fiscal deficit at a manageable level of not more than three percent of GDP.” 

Of course Gary is right. But the lack of progress on everything, including a revision of rules that can be done through executive order, has reduced the credibility of government promises. One wonders why they spend tax money on investment roadshows only to promise the same old things.

According to Secretary Pernia, “the draft EO on the 11th FINL (Foreign Investment Negative List) eases foreign restriction on the following areas and activities: private recruitment for local and overseas employment; practice of select professions; construction and repair of public works projects; culture, production, milling, processing and trading of rice and corn; teaching at higher education levels, and retail trade.

“For the first category, which can be adjusted by an executive order, we already have the proposed EO, which is now with the President for his signature.” But why didn’t he sign it before a large number of Cabinet members embarked on that London roadshow? That would have made our team credible.

While a constitutional amendment is required on ownership restrictions, the President has not used his persuasive powers to fast track the required amendment. Former speaker Sonny Belmonte already showed how to do it quickly and painlessly. But so far, it is still words, words, words.

This is exactly like where we are on Build Build Build, only worse. Our government has to move beyond mere talk.   

Worse, they are doing a really bad job of selling tax reform so that we may lose investors already here. I think we need TRAIN 2 and it really is a matter of explaining how the reform impacts investors.

But if even the head of PEZA is openly against it, how can anyone else see the proposal’s merits? If they can’t convince her, forget convincing those who benefit from PEZA incentives.

It is time to change our mindsets on foreign investors. We have discouraged them for decades because our rent-seeking elite didn’t want any competition. Our economic development suffered as a result.  

We need more investors making bets on our economy’s ability to grow. We should know by now we cannot do it alone. Filipino First is the single biggest reason why we trail our ASEAN neighbors. Even communist Vietnam welcomes foreign investors.

Next time our economic managers plan a foreign road show to lure investors, they ought to do their homework first… deliver on promises made in the previous road show.

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