Killing foreign investment?

September 29, 2016 at 15:30

It is absolutely your right and even obligation to vehemently agree or disagree with any and everything President Duterte says. However, the discussions about the supposed impact of his pronouncements from cursing the European Union to wanting United States Special Forces troops to leave Mindanao are bordering on the absurd.

For example, one of those “My cousin knows someone who talked to…” received many comments a couple of weeks ago. In this case, it was that two French travel agencies would not send tourists to the Philippines if the death penalty was restored. The death penalty is a highly contentious subject and every company has a right to do business or not to do business with any person or country that they wish.

However, in this case, that means these travel agencies are not booking potential clients to the following nations that executed a convicted criminal in 2016: China, Taiwan, Saudi Arabia, Singapore, Indonesia, Japan and, of course, the United States. That list does not include the multitude of other nations, like Sudan and Pakistan, which are not high on the “Places We Must Visit” list.

As a point of information, the Philippines received 35,000 French tourists last year. Thailand welcomed 680,000 French tourists to visit their country. The last execution in the Philippines was in 1999; Thailand last executed a criminal in 2009.

The greater concern may be the overall effect of President Duterte’s “colorful” comments (in US President Barack Obama’s words) and the violent war on drugs may have on foreign investment to the country.

Foreign-investment money is controlled by people—not robots—who have opinions and biases that go beyond the number crunching. The numbers will always be foremost with long-term business viability and profitability at the top. But there are many factors that make up profitability, including labor costs, infrastructure expenses, regulatory costs, taxes, and access to local and regional markets.

The Duterte administration has not clearly defined its longer-term economic policies in terms of specific implementation. An example is the potential power shortage and high power cost. That is not beneficial for investment but it is still early in the term.

Nonetheless, foreign money does demand stability no matter where it goes, even in its home country. The fact that the outcome of the US presidential election offers such striking policy differences and is in effect tied at this point has put most new domestic investment plans on hold. The same is likely true for the Philippines.

Foreign investment is probably looking more at how the Philippines and the people are reacting to President Duterte’s highly controversial statements and whether there is a hint of government instability. We would look for this in the steadiness of the President’s Cabinet, as well as on the street.

It is nearly the fourth quarter and planning for 2017 is beginning. If the administration can keep the people on its side and offer some regulatory changes more encouraging to foreign investment, 2017 could potentially be an outstanding foreign-investment year. If not, 2017 will hold some serious economic challenges.

Source: www.businessmirror.com.ph