At least $10 B yearly FDI possible with reforms — JFC

By Richmond Mercurio (The Philippine Star) 

MANILA, Philippines —  The Philippines can easily attract at least $10 billion in foreign direct investments (FDI) annually once existing restrictions and improvement on its overall competitiveness are addressed, the Joint Foreign Chambers (JFC) of the Philippines said.

JFC officials said yesterday while the country may be considered the “rock star of Southeast Asia” as far as economic expansion is concerned, it remains a laggard in terms of FDI due to several factors affecting its business environment.

“The Philippines should receive $10 billion a year. But what is preventing the country’s economy from running on all cylinders? Growth of business processing, manufacturing, and tourism have been high, but the growth of agriculture has been weak and mining has moved backward despite its high potential,” Japanese Chamber of Commerce and Industry of the Philippines president Hiroshi Shiraishi said.

“The really relevant criteria is how we are doing compared with our leading ASEAN neighbors such as Vietnam, Thailand and so on. Our target should be to have at least the ASEAN average in FDI. And we still have a long way to go,” Canadian Chamber of Commerce of the Philippines president Julian Payne said separately.

The country’s net FDI last year zoomed 40 percent to a new record level of $7.9 billion, surpassing the full-year target of $6.7 billion.

“The key point is how quickly the new administration can proceed with its stated intention to remove restrictions of FDIs. There have already been a number of initiatives,” Payne said.

In a new Arangkada Project publication released yesterday, the JFC outlined various recommendations on reducing cost of doing business and increasing competitiveness and ease of doing business in the Philippines.

“There was a lot of concern about the reputation impact of the extrajudicial killings. But most companies have realized that in most sectors, it hasn’t changed the day-to-day operating environment and most companies are pushing ahead,” Australian-New Zealand Chamber of Commerce of the Philippines president Tom Grealy said.

“The underlying economic management is good, and there is fundamental reform coming which will potentially set the Philippines up for the next 20 years, particularly the tax reform so it’s quite actually an exciting time,” he added.

With regard to tax reform, the JFC said concerns have been raised by its members over proposed provisions in the first TRAIN that could have negative effects on business process management, ROHQ, automotive, and beverage firms.

The group said some of these concerns were ameliorated in the House version of the new law, while others may be resolved in the Senate and the bicameral reconciliation process.

“JFC members support taxes that are more progressive than regressive, that incentivize individuals and corporations to work hard to produce income, save, and invest, that impose a significant burden of taxation on consumption, support investment and job creation, support needed physical and social infrastructure programs, and are collected fairly, fully, efficiently, and without corruption,” the group said.


PH plays catchup on FDIs

September 15, 2017

The Philippines should catch up with Asean countries in terms of attracting foreign direct investments (FDIs) but foreign investors said this will depend on how fast government would be able to remove restrictions.

While the Philippines has broken out of its low level of FDIs – from $1.1 billion in 2010 to $7.9 billion in 2016 and h averaged $6.5 billion per year — – the number still lags behind Asean, according to John Forbes, chief of party of the Arangkada Philippines Report and senior adviser of the American Chamber of Commerce of the Philippines.

The Philippines breached the Arangkada target of $7.5 FDIs but the group will not set any new targets.

The Joint Foreign Chambers had said FDI should be targeted to exceed $10 billion and be measured in erms of jobs and exports generated.

Forbes said the group is not making an assessment of the Arangkada goals but said these have been updated to reflect the 10-point agenda of the Duterte administration and the Philippine Development Plan.

Julian Payne, president of the Canadian Chamber of Commerce of the Philippines for his part said the relevant criteria here is how the Philippines fares with Vietnam and Thailand.

But Payne said the key point is how quickly the administration proceeds to remove the restrictions on foreign investments.

There have been moves to lift foreign restrictions on public utilities as well as on construction. The Foreign Investment Negative List is also being reviewed.

“With these initiatives, it obvious FDIs will grow but to set a specific target is risky… it’s better to benchmark with the Asean average… (the Philippines is) clearly below it,” Payne said.

In 2015, the Philippines attracted $5.7 billion FDIs which pale in comparison with Singapore whose FDIs stood at $61 billion; Indonesia $17 billion and Malaysia and Vietnam with more than $11 billion each and Thailand’s $8 billion.

Ernesto Pernia, socioeconomic planning secretary, said he wants to “drastically shorten” the FINL and that he supports aggressive liberalization to be able to open up more business areas to foreign investors.

Pernia told reporters on the sidelines of the Forum the current draft is a long list and “ I want to really shorten it drastically.”

Pernia said areas up aggressive liberalization are retail trade, certain professions, public utilities, and contractors. “

The final form will be more aggressive, it will be closer to the Asean. There are many things in there they are not increasing it by 40 to 60 percent equity, I said bring it up to 100 percent for certain areas,” Pernia said.

Pernia cited professors, as one of the professions that will be likely removed under the FINL.

The Regular Foreign Investment Negative List, which was last promulgated by the previous administration in May 2015 through Executive Order No. 184, enumerates the investment areas and activities reserved exclusively for Filipinos as well as industries where foreign equity of up to a maximum of 40 percent is allowed, as mandated in the Constitution.

The review of the FINL issued periodically by Malacañang under the Foreign Investments Act of 1991 started in May this year.

The Duterte administration seeks to open up the economy by lifting economic restrictions in the Constitution, in order to open more business areas to foreign investors. Under the 2015 Negative List, 100 percent foreign participation is allowed only for retail trade enterprises under certain conditions specified in Republic Act 8762 or the Retail Trade Liberalization Act and also in the rice and corn industry under certain conditions. The 2015 list also allows full foreign participation in the exploration, development and utilization of natural resources through financial or technical assistance agreements with the President. — I. Isip. and A. Celis


PH should give foreign investors more leeway – NEDA chief

By Reuters | , 8:46 AM
NEDA chief Ernesto Pernia (Reuters file)

MANILA – The Philippines should “drastically” cut the number of sectors and activities closed or limited to foreign investors to get more of the investment flows into Asia, the socioeconomic planning secretary said on Thursday.

Ernesto Pernia said that when he was given an initial draft of an updated “foreign negative list”, he sent it back for amendment because it was “puny.”

“I want a more aggressive liberalization,” Pernia told reporters on the sidelines of the Arangkada business forum organized by foreign business chambers.

The Philippines is one of Asia’s fastest-growing economies but it lags regional peers in terms of attracting foreign direct investment because of foreign ownership restrictions, high power costs and poor infrastructure.

Pernia said that among the sectors and activities targeted for opening or further opening were the practice of all professions, retail trade enterprises, ownership and management of public utilities and contracts for construction.

Since coming to power in June 2016, President Rodrigo Duterte has vowed to open up the economy and liberalize sectors such as energy, power and telecoms to make the country more competitive and give Filipinos better services and lives.

In terms of openness to foreign investment, “we have to be at par with other countries, no choice, otherwise we will continue to be left behind,” Pernia said.

Foreign direct investment hit a record $7.9 billion in 2016, central bank data showed, but the figure pales in comparison with those it has for Vietnam ($12.6 billion) Malaysia ($13.5 billion) and Singapore ($61 billion).

Investors have long been frustrated at being shut out of some sectors in a market of more than 100 million Filipinos, either squeezed by local monopolies or regulations that bar or limit foreign ownership in certain activities.

“The key point is how quickly the new administration is going to proceed with its stated intention to remove restrictions on foreign direct investment,” Julian Payne, president of the Canadian Chamber of Commerce of the Philippines told reporters.

“You want to at least have the ASEAN average (of FDI flows) and we still got a long way to go,” Payne said.


Foreign chambers pitch reforms to Duterte gov’t

September 15, 2017

Duterte Cabinet
Pres. Rodrigo R. Duterte during his meeting with members of the Cabinet in this photo taken in Malacanang. — PRESIDENTIAL COMMUNICATIONS

By Elijah Joseph C. Tubayan

FOREIGN BUSINESS chambers in the country yesterday set the tone for engagement with the over one-year-old government of President Rodrigo R. Duterte, unveiling reform proposals under their continuing “Arangkada Philippines” initiative that was launched in 2010 at the beginning of the previous administration.
In their Sept. 14 annual report, titled: “Implementing the 10-point agenda” — referring to guideposts the current government has adopted in order to spur overall economic growth faster and reduce the ranks of the poor when it ends its term in mid-2022 — the seven members of the Joint Foreign Chambers of the Philippines (JFC) said this year’s recommendations were drawn from unfinished reforms in past “Arangkada” (accelerate) lists, the government’s own blueprint as especially contained in the 2017-2022 Philippine Development Plan, as well as inputs from the Philippine Chamber of Commerce and Industry, The European Chamber of Commerce of the Philippines “and other sources.”
The JFC said its “extensive menu of policy suggestions” is designed to ensure that “the Philippines will be rated in future years much closer to the other ASEAN-6 economies that it currently lags behind,” referring to bigger economies of the Association of Southeast Asian Nations.
The reforms are grouped under the topics: continuing the macroeconomic agenda; increase competition and the ease of doing business; infrastructure building; rural development; human capital development and reproductive health; science, technology, and arts; and poverty alleviation and social protection program.
Recommendations include various tax reforms, pushing the government “to double” gross domestic product (GDP) growth rate to nine percent (compared to 7-8% officially targeted up to 2022), “supported by a clear long-term industry policy”; growing merchandise exports by 15% a year (compared to 5-9% annually under official targets until 2022); strengthening delivery of microfinance and micro-insurance products and services; improving transparency and the regulatory environment; opening up further telecommunications, retail and public utilities; an aspiration for foreign direct investments to exceed $10 billion partly by making the Foreign Investment Negative List “more positive” by reducing restrictions; creation of independent regulators for railways, airports and seaports; improving the public-private partnership framework “to free up fiscal space,” speeding up power projects and drafting a renewable energy road map; mass transit systems for Cebu and Davao cities; reviewing the average effective tax rate for large-scale mining to make sure it is not more than what is imposed across Asia and the Pacific; increasing the public education budget to four percent of GDP; further revising curricula to narrow the skills-jobs mismatch; allowing foreign schools to operate and foreigners to teach in the Philippines; as well as reducing fertility rate to 2.1% in 2022 from 3.1% in 2015.
“I think at this stage, there is progress being made,” American Chamber of Commerce Senior Advisor John D. Forbes said in a press conference yesterday at the sidelines of the “Arangkada” report launch in Manila Marriott Hotel in Pasay City.
“But the question is: is it going to continue and increase the pace?”