AEC and foreign direct investment

July 7, 2015 at 16:42

ASEAN received a total of $122 billion in foreign direct investments (FDI) in 2013. The Philippines received $4 billion, or 3 percent.

The European Chamber of Commerce of the Philippines (ECCP) seeks and promotes open international trade, and the creation of an investor-friendly environment in the Philippines as a means to achieve inclusive growth, more specifically, to move to a higher level of sustainable growth through higher local and foreign investments, create more and better jobs and make growth inclusive.

A sustained, major increase in FDI is needed and can only be achieved through economic liberalization policies, lifting of restrictions on foreign investment with the aim of increasing competition, and measures to make it easier to do business.

In this context, two issues were high on our agenda:

1. A less negative Foreign Investment Negative List (FINL); and

2. Amending the restrictive provisions of the 1978 Philippine
Constitution.

Unfortunately, we were recently defeated twice:

1. Malacañang issued the new FINL and, after two years of debate with the National Economic and Development Authority and the Economic Cluster and making recommendations how and where changes could be introduced, administratively and through legislation, it is disappointing to find out that the new FINL is basically as restrictive as the previous one.

2. Speaker Feliciano Belmonte Jr. has been driving Resolution of Both Houses 1 (RBH 1)  for a long time, and local and foreign businesses have supported this important move to amend the restrictive provisions of the Constitution, and to allow more foreign investment to come into the country, needed to create more competition which is good for Juan de la Cruz who will get better products and services at a better price. However, in the last session of Congress before recess, leaders of the House were able to muster 267 lawmakers to attend—needing 217 affirmative votes to approve RBH 1, or the economic Charter change (economic Cha-cha)—but the vote never happened. The question remains whether there was a Palace hand or a lack of affirmative numbers. What is sure is that Belmonte has given up on the economic Cha-cha.

In other words: A bad week for business, a bad week for potential foreign investment, coming at a time where the FDI numbers for the first quarter of 2015 in terms of actual inflows and registration look pretty bad, both falling by about 50 percent.

Given these defeats, what is business now hoping for?

We sincerely trust that the President will finally sign the following
legislation:

• Philippine Competition Act—legislation that will create a level playing field, that is a requirement for potential free-trade agreements with Europe and the Trans-Pacific Cooperation, pushed by the US, and an expected measure for Asean integration;

• Amended cabotage law—we are happy that the Senate version won in the bicam; the legislation will allow foreign ships to transport cargo (containers and bulk) directly to ports in the country, including Cebu, and accept cargo destined for foreign countries;

• Department of Information Communications Technology (DICT)—badly needed to create the required infrastructure for the more and more important BPM/KPM sector, which is also growing fast in Cebu; we are all aware how slow broadband is in this country and how expensive it is compared to competing countries around us; the DICT is also needed to finally get the Data Security Act implemented through the creation of the Data Security Commission, which will create the needed IRR; another  task of the DICT will be to raise the level of protection against cybercrime.

• Tax Incentives and Management and Transparency Act—we still have a number of recommendations that will hopefully be accepted by the bicameral committee; we agree that more transparency is needed but—at the same time—do not want fiscal incentives touched which are badly needed by new investors as the cost of doing business in the Philippines is higher than in competing countries.

As ECCP, we will continue to fight for a level playing field and a competitive business environment, following the battle cry of the Philippine Economic Zone Authority: Red Carpet—No Red Tape!