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[OPINION] Improving the investment climate

By:  – @inquirerdotnet  |  / 05:08 AM September 23, 2017

 

The National Competitiveness Council has been tracking the Philippines’ progress across various global indices since 2010, and by most indicators it has gone up the rankings over this period. It’s a remarkable achievement for the country, which has struggled to improve the relative attractiveness of its business environment to international investors. But despite these improvements, it would be premature to pronounce Philippine competitiveness a success. As we discussed in the recent Arangkada business forum, there is still a lot of room for the country to introduce reforms and institutionalize the practices behind our improvements.

The Joint Foreign Chambers (JFC), in a daylong forum dubbed “Arangkada: Implementing the Ten-Point Agenda,” gathered an audience of stakeholders to discuss the specific areas for reform and the potential measures that could be undertaken by the government. The conference provided insights on how the investor community views the Philippine market and how the government intends to address some of the investor concerns. The Arangkada publication has several recommendations. Here are the first three:

The Philippines should continue aggressive efforts to improve its rankings. The government and the private sector should select areas of competitiveness which are the most important to investors and where the Philippines can move up the most and the fastest, and focus resources on improving these.

The Philippines should equal or exceed Indonesia and Vietnam in the next few years and Thailand in the medium term in terms of rankings in major global competitiveness indices.

A review of potentially anticompetitive legislation and policies that may substantially prevent, restrict, or lessen competition is in order.

One specific area is the foreign investment negative list. The government is currently reviewing the list, which was last updated in 2015. The list outlines the sectors where the government has decided to exclude foreign participation. But under this administration, officials have spoken of ensuring the highest possible easing of foreign restrictions to date.

The commitment to ease restrictions is a positive development. However, the list itself is only one part of the broader restrictions that the Philippines has imposed on foreign participation. Foreigners hoping to invest in some sectors, like the practice of some professions or the media, will still have to wait for legislation or even constitutional amendments before they can participate. Even then, fostering a good business environment goes beyond liberalizing the economy on paper. A more attractive economy will be the result of several factors, including a stable macroeconomic environment, adequate infrastructure, lessened red tape, and low incidences of crime and corruption.

Unlike his predecessor, who convened the Legislative-Executive Advisory Council only twice during his term, President Duterte has decided to convene it regularly. This ensures better coordination among the leaders of the government branches to discuss the legislation needed to achieve the administration’s socioeconomic agenda. So far, the council is prioritizing these proposed pieces of legislation: the Ease of Doing Business Act to cut red tape, the Rightsizing the National Government Act to streamline the bureaucracy, Comprehensive Tax Reform, the National Transport Act to address the transport crisis, and the amendment to the Public Services Act to liberalize the telecommunications, transport and power industries.

Alongside these legislative measures, the government should incorporate automation into its processes. For example, it could use automation to streamline the business permitting and licensing system, cut bottlenecks in land titling, and interconnect various agencies. These measures would reduce opportunities for corruption.

Foreign investments have been increasing in the last few years. Last June it surged by 182.7 percent—a vote of confidence in the country’s prospects. We cannot lose this momentum. Economies worldwide are also increasing in competitiveness. We must work doubly hard lest we get left behind.

Source: https://opinion.inquirer.net/107343/improving-investment-climate

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[OPINION] The investment and infrastructure challenges in implementing the 10-Point Agenda

Thinking Beyond Politics by Victor C. Manhit | September 20, 2017

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In the medium term, the government is aiming to reach an annual GDP growth of between 7% and 8%. These rates are higher than we’ve seen in recent years, but our officials are optimistic. At the sidelines of the recent Arangkada business forum, Socioeconomic Planning Secretary Ernesto Pernia assured us that these rates are achievable, particularly when the current restrictions on foreign investments are lifted. While listening to the presentations, it seemed as though all our economic officials are similarly bullish for what they can accomplish.

NEW DYNAMISM IN THE INVESTMENT ENVIRONMENT?
At present, the government is reviewing the foreign investment negative list (FINL), which is the official list of sectors where foreign participation in excluded. Revised every two years, this round is the first time that the administration will have a hand in deciding where foreign investment is welcome.

By all accounts, this government is taking a more liberal approach than its predecessors.

At a different event, Secretary Pernia even shared that he had sent the initial draft of the 11th FINL back to the drawing board — deeming the first round of proposed changes too “puny.” This aggressive push is more than welcome for our economy, and Secretary Pernia’s statements are certainly an encouraging development.

The new list is expected to be released sometime in the next quarter, as the next draft will still have to be presented to the NEDA board for approval. According to Secretary Pernia, the sectors that he aims to open for foreign inclusion are: retail trade, professions, public utilities, and contractors. Some of these sectors are also expected to liberalize in line with the rest of the region as part of the ASEAN Economic Community.

As important as it is, liberalizing the investment environment is only one step to attracting more investment in the country. Deeper reforms are needed if we are to propel our economy to greater heights. Which reforms are necessary to improve our country’s competitiveness and foster an even more dynamic investment climate? These were the questions tackled during a recently held forum organized by the Joint Foreign Chambers, called “Arangkada Philippines: Implementing the 10-Point Agenda.”

Arangkada is a Tagalog word that translates to “accelerate,” a term that aptly captures the pace of our economy’s expansion over the last few years. While the previous administration made significant strides in fueling our economy, it fell short in achieving some of its growth and development targets. President Duterte and his team are capitalizing on these shortcomings.

Even before Duterte gave his oath of office, his economic team had already laid out its 10-point socioeconomic agenda. The speed with which it had declared its objectives reflected the administration’s obvious commitment to bringing about swift and impactful reforms — reforms that have to be implemented if we are to turn our ambitious targets into reality.

For those who were not able to make it, the Joint Chambers have published their lists of recommendations, covering macro-economic reforms, competition, infrastructure, rural development, human capital, poverty alleviation, and science, technology and the arts, in the conference proceedings.

BRIDGING THE INFRASTRUCTURE GAP?
The decrepit state of the country’s infrastructure is often cited as the Achilles heel of our economic potential. Thankfully, with the launch of the Build, Build, Build campaign earlier this year, there is no discounting that infrastructure is a centerpiece project of our current leadership. As a result, there has been renewed interest in the infrastructure sector and in how the administration will accomplish its targets.

For its part, the Duterte administration has announced a list of priority infrastructure projects.

During the forum, it was encouraging to listen to our government officials talking about the big-ticket projects that they intend to break ground on or even complete during this term. These projects include the Japan-funded Mega Manila Subway and 13 bridges across the Pasig River, two of which will be built with Chinese grants. Given the state of our traffic situation today in Manila, all of these projects will be watched and waited for with great anticipation.

Yet, several of these projects are reboots from the previous administration — a sobering reminder that they had failed to advance despite years of gestation. As always, the devil is in the execution, not the planning.

While the government has promised to increase infrastructure spending, this should also be complemented with institutional and policy reforms. The approval of the National Transport Policy this year is a good step towards unifying all transport projects. The administration’s push to right-size the bureaucracy is also a welcome measure to address the fragmented institutional setup of various transport agencies. Over the long term, a mechanism should be in place to ensure policy continuity every time a new administration steps into office.

FISCAL SPACE
With great anticipation also comes great apprehension about whether the Duterte administration will be able to see its commitments through to the end and achieve them as planned. Thankfully, it has everything going for it: years of sound fiscal policy have afforded the government a wide-enough fiscal space to make these necessary investments. It would be a waste to let the best opportunity that we have had in decades slip between our fingers.

Source: https://bworldonline.com/investment-infrastructure-challenges-implementing-10-point-agenda/