The news about the Philippines being the only country with raised growth expectations is an obvious indication that the economy is on an upward trajectory. The 7.1 percent GDP growth in the third quarter surpassed expectations, beating the numbers of our Southeast Asian neighbors including Singapore (0.3 percent) Indonesia (6.2 percent) and Thailand (3.0 percent). As experts noted, the country has the fastest growth in Asia second only to China ‑ a clear signal that we are bucking the global financial crisis due to the debt predicament in Europe.
Our financial expert-friends tell us the inspiring performance has generated a lot of “feeling good” for a country long described as an “economic laggard,” citing upgrades from Fitch, Standard and Poor’s and Moody’s, with the latter issuing a Ba1 (up from Ba2) rating last October, just a notch below investment grade. There are expectations that in the next couple of years, the Philippines could achieve an investment grade ranking — a far cry from the junk status that ratings agencies had been issuing since the early ’90s.
Despite these positive, confidence-building indicators, we still have to be cognizant of the fact that there is a sharp decline in foreign direct investments. Our friend, PDI columnist Bobbie Tiglao, has a point — FDI level is a critical gauge of our economic prospects since it is a “surrogate indicator for all business activity.” Bobbie particularly noted — and with growing alarm — that we are just a rank higher than Cambodia among the least favored countries for offshore investments. Cambodia attracted $2.3 billion and the Philippines, $2.7 billion FDI for the period covering 2010 to June 2012. Compare these figures with Indonesia that had $34.8 billion; Thailand $19.1 billion and Vietnam, $15.4 billion for the same period.
The reality is, the 7.1 percent third quarter growth and all the other encouraging developments do not necessarily reflect the performance alone of the Aquino administration in the last two years, since positive international perception of the Philippines as a good investment destination has been growing in the past five to seven years, as seen in the considerably substantial level of foreign capital infusion even during the onset of the global financial crisis. What we are wondering about is why the FDI inflow sharply fell by 83 percent in August, with the Bangko Sentral hoping we can still manage to attract a total of $1.2 billion in foreign direct investments for 2012 — definitely below the $1.5 billion average in the past 11 years, as disclosed by UP Economics professor and former Budget Secretary Ben Diokno.
The real score is that foreign investments are not coming in the way they ought to because of too many economic restrictions in our current Constitution, in particular the 60-40 rule on ownership that has discouraged foreign companies from investing. This was further emphasized when the Supreme Court recently ruled that PLDT was in violation of the foreign ownership provision of the Constitution. Foreign Secretary Albert del Rosario has cited these restrictive provisions, underscoring the need to revisit these as we try to redefine our international economic policy. Obviously, our economy is not as open as it should be as gleaned from the complaint of the Joint Foreign Chambers who sounded off on a list of negatives that affect FDI inflow. Of 87 countries surveyed, it would appear that the Philippines has “some of the strictest foreign equity rules,” scattered through various laws with some quite old and rarely reviewed to see if they still promote national interest and whether they hamper the creation of more jobs for Filipinos, the JFC statement asserted.
Admittedly, there is a very strong perception that the country is making a lot of headway in terms of fighting corruption, seen in the improved ranking in Transparency International’s Corruption Perception Index and the Social Weather Stations survey of Enterprises on Corruption saying the business sector has seen marked progress in the fight against corruption. Today however, there is a lot of concern over smuggling and the corruption that continues to plague the Bureau of Customs — something that seems to have been around for centuries. Admittedly, it would be totally hard to eradicate corruption, and perhaps the most practical approach would be to minimize it. While it may be clean at the top, the bottom is still rotten — making it even more “expensive” for importers because of the “increased risks” involved.
The good news is tourism has gone up, with an expected 4.6 million total arrivals for 2012 compared to the 3.9 million visitors last year. The airline industry has indicated it will need 15 million plane seats to achieve the 10 million target visitors for 2016, a sentiment echoed by the hospitality sector that said more hotels are needed because the 2016 target is doable. What the hotel and travel industry is concerned about are the existing domestic and international airports. NAIA has only two runways with the waiting time for landing and takeoff now averaging 30 to 45 minutes. PAL president Ramon Ang’s planned new international airport is still a long way off.
There is no question the Philippines has been extremely lucky in circumventing the financial crisis that continues to besiege other nations. But at the end of the day, our current financial upswing is credited literally to the “blood, sweat and tears” of our OFWs whose dollar inflows (estimated at $21 billion a year) stimulate consumer spending, propping up so many aspects of the economy including housing and real estate. They continue to be the saviors of the economy and have immensely contributed to all the good feelings about this country especially during the Christmas season.
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