Investment inflow to our economy slowed to a trickle for September, the BSP admits. The Philippines receives only a fraction of the investment flows that go to neighboring economies such as Singapore, Indonesia, Malaysia and Vietnam.
Without robust investment flows, there is simply no way we can manage to bring down unemployment or reduce poverty significantly. True, our present growth is a notch above our historic low rates of expansion. That does not mean very much, considering the volume of poverty we need to address.
At the moment, we are struggling to sustain 5% GDP growth. China, when it lifted 500 million out of poverty in two decades, was sustaining double-digit growth rates. No one accused us of being poised to replicate that.
In our case, the widely believed growth benchmark to make a dent on the poverty rates is to grow the economy by 7% for seven years. Such a growth performance is not even on the horizon. A conditional cash transfer program might bring relief for the poorest of the poor in the short term (and buy political support on the side), but it will not significantly bring down poverty rates.
Neda chief Arsi Balisacan built his academic career studying poverty. He should be in the best position to tell us honestly if we are making any headway in liberating Filipinos from misery.
We have been taken to task for falling behind our Millennium Development Goals commitments. We have fallen towards the bottom on the Ease of Doing Business Index. There is every indication we are not doing as much as we should be doing to bring down poverty.
Each time the President travels, he comes home boasting about the volume of investments his trip attracted (as a way of justifying expenses for the trip). Where have all those prospective investments gone?
I discussed many times in this space the deep-seated reasons why we are less than competitive in attracting investments.
We have constitutional provisions that limit the sphere for foreign direct investments. That is a handicap we are not about to cure.
Our power costs are among the highest in the region. That is hardly an incentive for investments in power-intensive manufacturing. It is a handicap we are not about to solve in a generation. Our power sector planning operates on a short horizon and there is a clear political prejudice against the use of nuclear power.
Besides, improving the cost-structure of our power generation itself requires investment inflows. With very low confidence in the predictability of our policy environment and the apparent ease with which live contracts are abrogated, attracting investments is a challenge.
Our bureaucracy is antiquated. It is a hindrance, as the global index on the ease of doing business shows, to business activity. Yet there are no plans on the drawing board to reengineer our obsolete bureaucracy.
Reengineering the bureaucracy to deal with changing economic realities requires a comprehensive effort, last attempted in the early seventies. Under a work-averse political dispensation, undertaking such reengineering is not even mentioned in the sparse policy statements we have heard.
In a competitive world where just-in-time delivery is the norm, our infrastructure is woefully backward. With all the billions in infrastructure projects being installed in Laos, Cambodia and Burma with Beijing’s generous assistance, the quality of our infrastructure will lag behind even more.
We begin from a clear disadvantage. We are an archipelago. Logistics is always an issue. Yet the only strategy to overcome that handicap, the “nautical highways” linked by roll-on, roll-off marine transport, wallows in policy purgatory.
The French-assisted contract to build telescopic ports, operable whatever the tide, was scrapped. The Chinese-assisted Northrail project was junked. The Belgian-assisted project to dredge up Laguna de Bay and build a circumferential road was cancelled.
The only new addition to Metro Manila’s crowded roadways, after over two years of the Aquino administration, is the small underpass at the junction of Quezon and Araneta avenues. The project was on the drawing board for years before. Meanwhile, hapless residents of the metro stew in interminable traffic jams all day, wasting productive time as much as fuel.
Investments in our educational system is seriously wanting. We are not training the next generation well enough to produce the quality manpower needed to propel our economy in a more competitive global environment. See how South Korea, for instance, invests heavily in training its youth. The weakness of our educational system will prove a serious handicap down the road.
Add to all these recent actions by the Aquino administration that undermine investor confidence.
All the flip-flopping on mining policy the past year puts a cloud over what otherwise is our most promising investment sector. Recently, the Board of Investments expanded the negative list for foreign investment activity. Rampant smuggling undermines the viability of manufacturing investments already in place.
Our corporate tax rates are among the highest in the world. Peace and order issues hound expatriates and investments located in far-flung areas where they are most needed. Airport safety in this country is a valid concern, underscored by the recent report on the Robredo tragedy. The business environment is as politicized as ever.
It is not only that foreign investments shy away. Filipino investments have found it more profitable to migrate elsewhere. In the present global setting, capital is highly portable. Nations need to compete to be more hospitable to capital — or else, investments quickly migrate.
Some have argued we simply do not have the sort of political order capable of helping us thrive in a competitive world.