EDITORIAL - Roadblocks to investment

At a trade expo last weekend, Philippine officials competed with their counterparts from other members of the Association of Southeast Asian Nations to entice foreign investors especially in the manufacturing sector.

The trade officials correctly trumpeted the Philippines’ strengths, notably a rich talent pool at relatively low cost, tax and fiscal incentives as well as the country’s strategic location within the region. The pitch was made on the sidelines of the 12th China-ASEAN Expo in Nanning.

Rising production costs and other problems are making manufacturers move out of China. The Philippines should be luring those investors, but so far, other ASEAN members such as Vietnam and Indonesia are the ones getting the bulk of the business. Even Myanmar is dangling numerous incentives to compete for foreign direct investment.

With a high literacy rate and widespread use of English, the Philippines’ edge has always been its workforce. The talent pool has made the country a center for business process outsourcing. Beyond getting value for money when it comes to human resources, however, investors consider many other factors in deciding where to put their money for the long-term.

The Philippine government knows what these factors are. One is power – a key component in manufacturing, but unreliable in the Philippines and the most expensive in the region. Another is infrastructure, still inadequate all over the country. Poor infrastructure affects logistics. Business groups have warned that last year’s congestion in Manila’s ports may recur as the Christmas season approaches.

A key problem is red tape. Despite some improvement in surveys on ease of doing business, the Philippines is still a difficult place for starting, operating and closing a business. Trade officials have tried to speed up the process, but local government units and several national agencies still have too many layers of requirements for doing business, many of them unnecessary and redundant, with each layer requiring a fee. The mountain of red tape, often designed for corruption, is one of the biggest reasons why the country remains a laggard in FDI among ASEAN’s founding members.

Another business concern is safety. Investors do not want to put large sums of money in areas where there is a risk of bomb or arson attacks if they do not pay protection money to extortionists of the New People’s Army and other armed groups. Kidnapping and homicide are also big concerns even in Metro Manila.

Investors have pointed out their concerns to the government for many years. As a place for doing business, the Philippines has real strengths. But it cannot be complacent when its neighbors are working to give investors what they need.