MANILA,
SEPTEMBER 27,
2011 (INQUIRER) The Philippines is once again open for
business, President Benigno Aquino likes to say. Trouble is, most investors want
to window shop.
Three weeks after a trip to China, Aquino is in the United States this week,
followed by a trip to Japan to press investment opportunities and spread the
word to investors in major trading partners that things are changing.
It's not that anyone doubts the potential of the Philippines. Massive
untapped mineral wealth, a prime position between Southeast and North Asia, a
large, growing and English-speaking population, and more than 7,100 islands
offer the scope for every type of tourist activity.
But bitter experience of endemic corruption, legal inconsistency, violence
and stifling bureaucracy have made foreign business wary and seen the country
fall behind its neighbors.
"It's about red tape, and about the weakness of institutions, infrastructure,
and about electricity and traffic jams. It's nothing secret," said Toshinao
Urabe, Japan's ambassador to the Philippines.
"We are attracted by the potential of the Philippine economy. You have a huge
population, you have the resources," Urabe said, but then noted that foreign
direct investment had lagged behind its neighbors.
The Philippines attracted just $1.7 billion, or 2.3 percent of the $75.6
billion of foreign direct investment that flowed into the 10 members of the
Association of South East Asian Nations (ASEAN) in 2010, trailing Singapore,
Indonesia, Malaysia, Vietnam and Thailand, data from ASEAN shows.
The business-process outsourcing sector is growing, and there is immediate
potential in sectors such as mining and tourism, which have attracted foreign
interest.
The country has mineral reserves, including massive gold and copper deposits,
estimated to be worth around $1 trillion, but policy bottlenecks are hampering
investments. .
The country would also appear to be a magnet for tourism with untouched
beaches and incredible diving sites, just a two-hour flight from Hong Kong. But
poor airports, infrastructure and security concerns have limited the sector's
growth.
Among ASEAN countries, the Philippines ranks sixth for tourist arrivals,
drawing just under 5 percent of almost 74 million people visiting the region in
2010.
Its 3.5 million tourists in 2010 is just one-seventh of Malaysia's
region-leading 24.6 million, and lags Thailand, Singapore, Indonesia and
Vietnam.
Derailed
Fifty years ago, the Philippines was Asia's tiger, set to follow Japan on the
road to developed prosperity.
But the dictatorship of Ferdinand Marcos, built on corruption and cronyism,
derailed that dream, and a quarter of a century after his downfall the
Philippines has yet to recover.
"We are not where we should be," Aquino told Reuters in an interview. The
interest is there, he says: his trip to China produced $7 billion to $9 billion
of potential investments, and the government continually receives unsolicited
proposals.
The challenge is to create an environment — regulatory, legal and investment
— that turns the interest into reality.
As an example, Aquino said one airline and hotel conglomerate wanted to build
30 hotels, with the first two to open next year. However, the group had not
decided what routes would be serviced or where all the hotels would be built.
In the end, that will depend on issues such as airport facilities and links,
quality of local roads and infrastructure, and dealing with different levels of
government.
Improvement
Aquino's election last year raised hopes of improved governance after two
administrations dogged by allegations of corruption and wrongdoing. But at the
same time, the election was a reminder of what worries them about Manila.
Second to Aquino was Joseph Estrada, thrown out of office in 2001 and later
convicted of plunder and jailed — only to be pardoned within weeks and able to
run for president again.
Aquino has set about pursuing corruption allegations against public
officials, enforcing tax laws to cut evasion and improve collections, and make
government decisions more transparent.
And there are signs of improvement — the Philippines jumped 10 places to 75th
in the World Economic Forum's global competitiveness index.
The government's fiscal management has been rewarded with upgrades by the
three leading rating agencies, putting the country within reach a coveted
investment grade ranking.
But the World Economic Forum also said the country lagged on the quality of
public institutions, corruption, security, and infrastructure, and Transparency
International's Corruption Perceptions Index shows how the Philippines has gone
backwards.
In 2010, it ranked 134th out of 178 countries, behind Indonesia (110) and
Vietnam (116). In 2001, the Philippines had ranked 65th out of 91 countries, and
was seen as less corrupt than Vietnam (75) and Indonesia (88).
Legacy
Aquino's centerpiece policy of drawing investors is the ambitious
public-private partnership (PPP) to improve roads, ports, airports and other
infrastructure through attracting billions of dollars of private sector funds.
Ideally, the PPP scheme would ease pressure on government finances, improve
national infrastructure and show investors that the business environment has
changed.
But it has been a long time coming. The launch of the first round of projects
has been continually delayed this year as projects have been reviewed, financing
planned and efforts to make contracts secure and sound have taken longer than
expected.
The risk is, with countries such as Malaysia, Thailand and Vietnam also
looking for infrastructure funding and the global economic outlook darkening,
investors will turn elsewhere.
Aquino casts rehabilitating the Philippines' economic credentials as an
extension of the work of his parents, national heroes for their role in the
overthrow of Marcos and restoration of democracy.
"I see my role really as to complete what they both started and nurtured.
This would be the culmination that we finally have overcome that hump and that
the progress will continue regardless of who is here," Aquino said.
"The greatest tragedy would be for the next generation to undergo the same
problems we did. That would mean we're an utter failure." —
Reuters
Chief News Editor: Sol Jose Vanzi
© Copyright, 2011 by PHILIPPINE HEADLINE NEWS ONLINE
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rights reserved
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