The Philippines is open for business

“The Philippines is open for business.”

These were the parting words of Secretary Frederick Go of the Office of the Special Assistant to the President for Investment and Economic Affairs (OSAPIEA) during the First General Membership Meeting of Share PHIL on January 26, 2024.

Following the “whole of government approach,” the OSAPIEA was created through Executive Order 49 to ensure effective integration, coordination and implementation of the various investment and economic policies and programs of the government. Speaking on the theme of “Driving Sustainable Economic Development,” Secretary Go shared the various initiatives and priorities of the government to make the Philippines a top investment destination.

Boosting the Philippine stock market

With respect to the development of the capital market which is aligned with SharePHIL’s advocacies, the key objectives are: to reduce friction costs, improve liquidity and enhance ease of doing business. In line with these objectives, major reforms have been instituted such as the shortening of the settlement cycle from T+3 to T+2, shortening of the IPO processing to strictly adhere to the 45-day timeline for processing registration statements, simplifying the IPO application documentary requirements and implementing short selling, 27 years after this was first proposed.

To further support the growth of the capital market, ongoing reforms include the reduction of sales tax from 0.6 percent to 0.1 percent, standardization of the withholding tax on dividends to 10 percent through proposed House Bill 9277, allowing the 15-minute after hours trading at VWAP through proposed amendments in the trading rules and guidelines and encouraging more IPOs and listings as the country has one of the fewest listings in the Asian market.

Unlocking growth and potential investment opportunities

The three key pillars of the drive to promote investments are: ease of doing business, simplifying processes and adopting a whole of nation approach. After 29 years, the BOT law was amended in December 2023 to revitalize PPPs and encourage unsolicited proposals while giving the original proponent the right to match comparative proposals and encouraging joint ventures as a PPP modality.

The ongoing review of the CREATE and TRAIN Laws aims to restore certainty, protect investments and simplify incentives. Changes include restoring the powers of Investment Promotions Agencies (IPAs) such as the BOI and PEZA, simplification of VAT rules and clarifying sunset provisions.

The Philippines has taken steps to improve its business environment by implementing several regulations and laws. EO 18 creates a “Green Lane for Strategic Investments” to streamline approval processes and enhance ease of doing business. EO 32 aims to expedite permitting for telecom infrastructure, expanding connectivity and creating jobs. The Ease of Paying Taxes Law simplifies tax administration, strengthens taxpayer rights and introduces reforms like taxpayer classification and enhanced refund processing. These measures aim to create a more conducive environment for businesses and boost economic growth.

Priority industries

Secretary Go identified five priority sectors: semiconductors and microelectronics, mining, agriculture, pharmaceuticals and steel. In the semiconductor industry, he aims to enhance assembly, testing and packaging while introducing higher value processes like design.

He also emphasized the significance of promoting nickel and copper mining to accelerate exploration and follow Indonesia’s example in downstream processing.

For agriculture, he highlighted the need to boost production and improve logistical chains for food security. He also stressed the need to lower healthcare costs through the pharmaceutical sector and the importance of the steel industry for growth.

Investment performance to date

Though some of the recent reforms are still in their nascent stage, these are good signals to the global investing community that the country is serious in its efforts to create a conducive investment climate for economic prosperity.

Signs of improving investor sentiment is the performance of the Philippine stock market, measured by the Philippine Stock Exchange Index (PSEi). The PSEi reached an intraday-high of 7,070.72 on April 2, 2024, the highest in 52-weeks, though it has pulled back to 6,745.46 on April 5, 2024.

In a report dated March 25, 2024, HSBC Global Research is optimistic about the Philippines’ ability to attract foreign direct investments (FDIs) in the coming years. According to HSBC, the country has implemented reforms since 2018 that have improved the business climate, making it more attractive to investors. As a result, the government is optimistic that the Philippines can become a premier investment destination for foreign businesses in Asia and achieve its goal of becoming the second top destination for FDI in Southeast Asia by the end of 2028.

A recent US Investment Mission last March headed by Secretary of Commerce Gina Raimondo, announced investment commitments of over US $1 billion in high impact industries prioritized by the government such as renewable energy, electric vehicles, digitization and communication.

The Department of Trade and Industry (DTI) reported that 46 projects valued at $14.2 billion are in various stages of preparation and implementation, representing 20 percent of the pledges made by foreign investors. Additionally, the DTI approved P1.4 trillion worth of investments in the first quarter of 2024 through the Green Lane program, bringing the total number of projects under this program to 59 since 2023, with an aggregate value of P1.9 trillion. Most of these projects involve renewable energy.

There is no doubt that the country is moving in the right direction. The challenge is to keep the momentum and be resolute in increasing the Philippines’ attractiveness as an investment destination. We must build on our strong growth outlook and tell the world that “the Philippines is open for business.”

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The author Ma. Aurora “Boots” Geotina-Garcia is the chairperson of SharePHIL and founding chairperson and president of the Philippine Women’s Economic Network (Phil WEN). She is president of Mageo Consulting Inc., a company providing corporate finance advisory services. To learn more about SharePHIL, visit https://bit.ly/m/sharephil