Investment friendly rules is an invitation to direct foreign investments
October 11, 2011 at 18:12
This is a re-posted opinion piece.
Right. Reforming our investment laws is not a silver bullet. I don’t think advocates ever said that. There are other things to do and reform to make the Philippines investment friendly. Removing rules that discriminate against direct foreign investments is a good starting point for reforms.
Foreign investors have the capital, technology and expertise for big ticket industries that local investors do not have on their own.
But if they have to resort to underhanded tactics, such as using dummies even to organize a corporation, I can understand why they would choose other countries with less restrictive laws.
It may be true that foreign investors cannot own land in China but they still come in droves to invest in that country. Why? Because there are other things going for it, not the least of which is a welcoming mat.
I have always wondered why restrictions on foreign investments were put in the Constitution in the first place. Is it because the framers were making sure it would not be easy to change them? Who lobbied so it is written with indelible ink.
If it were not that significant in attracting fdis, why was it put in the Constitution, the fundamental law of the land? Foreign investors who have dared to invest in the Philippines said that this is a hardship post.
The debate on whether or not the restrictive rules on foreign investments should be changed has been going on for too long and that in itself is symptomatic. In many trade fairs that include other countries in the region, we are seen as a country that has lagged behind.
That we should even continually debate the issue is in itself a cause for concern. It projects an atmosphere of hostility against outsiders. The oligarchs are favored from the start by the Constitution, even before they have shown their capability in the field.
If it had not been in the Constitution, it should have been easier to change. It does not help to say that changing the rules for direct foreign investments is not a silver bullet. On the contrary, changing the rules would immediately telegraph the message that we are open for business, like most countries in the region.
There has been such opposition from the oligarchs (who control the state through a political system dependent on money and popularity) that legislators like Senate President Juan Ponce Enrile and Speaker Feliciano Belmonte Jr. have to tread carefully. They do not want to ruffle the feathers of the powers that be.
Enrile and Belmonte have had to repeatedly assure the government that changes in our economic rules will be made through a legislative process and will not touch political issues.
I don’t know how determined our legislators to support and push for the Enrile-Belmonte bill. They will have to be because, as in the past any change that breaks the status quo is not wanted.
That shows how important changing the economic provisions is.
The changes may not be a silver bullet but it will help to break down a major obstacle that hinders the country from acquiring silver bullets.
We have seen the harm a constitution unfriendly to direct foreign investments can do. It is time that we try something new — do away with unfriendly rules and work on other factors such as poor infrastructure, poorly educated labor force and reform our byzantine bureaucracy. I once heard a foreign investor say that after hurdling through all the difficulties, they still have to face the political threat that the project would be cancelled under a new government.
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There is another reason why we need more investments to come into the country soon. The Philippines will need funds to cope with climate change. According to a UN study, the Philippines is third in the list of vulnerable countries because of climate change. We are too poor to cope with the disasters brought about by typhoons and flooding. It is happening before our eyes. Apart from government that is not ready to cope with natural disasters, we don’t have the money to build adequate infrastructure. We may need to build new living and working conditions for those who live in disaster areas.
We are more vulnerable to the hazards of climate change because we do not have the means to cope with disaster. Other countries equally exposed to the hazards of climate change are not as vulnerable because they have the means to cope — large scale evacuations, transportation and in cases moving populations in the entire coastal area inland. In other words, the vulnerability of a country is directly proportional to the means it has to cope with large scale disaster. So it is not surprising that the Philippines, apart from geographical reasons should be at the top of the list of vulnerable countries. It is too poor and ill-equipped to combat the effects of climate change.
Among the 10 countries facing the highest risks are Vanuatu, Tonga, the Philippines, the Solomon Islands, Guatemala, Bangladesh, Timor-Leste, Costa Rica, Cambodia and El Salvador. In the UN report it listed Vanuatu with a fresh water shortage ranks No. 1 with 32 percent disaster risk. Tonga in the second spot has 29.08 percent while the Philippines ranks No. 3 with a 24.32 percent disaster risk.
“The risk index used in the report analyzed country exposure to natural disasters like storms, floods, earthquakes, droughts and sea level rise,” the report said.
The countries’ susceptibility to damage is based on the state of their economy and infrastructure, and the ability to respond to these disasters through preparedness measures and early warning systems. The Philippines should be ready for more rains in the coming years.
The climatology division of the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) reported “climate data from 1960 to 2003 showed significant increases in the frequency of hot days and warm nights in many areas of the country.”
According to Rodne Galicha, Philippine country district manager of The Climate Reality Project Filipinos already know from experience how climate change affects them. “As the study shows, the Philippines ranks third in exposure to natural hazards like earthquakes, storms, floods and droughts, as well as the exposure of populations to sea level rise by one meter,” Are we ready with the means to mitigate its effects on the population? Without money and infrastructure to cope, the future looks bleak.
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By: Carmen N. Pedrosa – From A Distance
Source: The Philippine Star, Oct. 9, 2011
To view the original article, click here.
