- Published on Monday, 12 November 2012 19:00
- Written by Manny B. Villar / Entrepreneur
WE
have a huge opportunity to attract investments given the cash hoard of
transnational corporations. They are looking for new places where they
can pour capital and generate profits while developed markets are
languishing in recession (like Europe) or struggling to recover (like
the United States).
We are also poised for
continuing growth based on our economy’s performance in the first
semester, the increasing public spending on capital projects, the robust
spending that is being fueled by remittances from overseas Filipinos
and the strength and resilience of the domestic financial system.
The road to high
growth and prosperity, as I have said before, is not smooth as silk.
Even the recent upgrading by Moody’s Investor Service of the
Philippines’s sovereign credit rating to a notch below investment grade,
which brings us closer to the rating that should open the gates for
more investments, is not a guarantee that investors will come with
chests full of money to put up factories or open businesses here.
Moody’s provided
guidance on how the Philippines can move up to investment grade, which I
discussed last week, but it also cited developments that could result
in a downgrade: “The emergence of macroeconomic instability that leads
to a substantial deterioration in fiscal and government debt metrics, an
increase in debt servicing costs, and/or an erosion of the country’s
external payments position.”
Last week the World
Bank (WB) released its “Doing Business 2013” report, which ranked the
Philippines at No. 138 out of 188 countries, down two rungs from No. 136
in the previous year’s report, due to the absence of significant
reforms to speed up dealings with government agencies involved in the
processing and issuance of business permits and other requirements
imposed on investors.
The WB annual report
evaluated the ease of doing business in different countries based on
various factors, such as the time and expense needed to start up a
business, including how many procedures a prospective enterprise has to
undergo and how many documentary requirements it has to accomplish.
The report gave the
Philippines slightly poorer rankings in almost all categories related to
the ease of doing business during the period June 2011 to June 2012
compared with the previous year. While the Philippines continued to
improve its macroeconomic environment and achieve pace-setting growth in
terms of gross domestic product, the report said, “it lags in the
implementation of regulatory reforms that would make it easier for local
entrepreneurs to conduct their businesses.”
Lamentably, the
Philippines again emerged the laggard in Southeast Asia. Singapore
retained its No. 1 global ranking. Malaysia ranked No. 12, Vietnam
ranked No. 99, Brunei Darussalam ranked No. 79, Indonesia at No. 128 and
Cambodia was No. 133.
Outside of the global
rankings, we have to address other problems that may deter investors.
For example, the recent peace agreement signed by the government with
the Moro Islamic Liberation Front has earned the support of other
countries, and aroused interest from investors.
However, parts of
Mindanao are suffering from a power shortage, which may persist for at
least one year, according to the Department of Energy. And it estimated
that Mindanao needed an additional 100 to 150 megawatts of generating
capacity to satisfy demand.
I need not stress that
measures should be implemented as soon as possible to cope with this
and other problems that may affect our chances of attracting
investments. Our economic planners may have to go back to their
assumptions and do some updates. For instance, earlier assumptions might
have included a continuing double-digit growth in China, which is a
major market for Philippine exports. China, however, has slowed down to a
7 percent to 7.5-percent growth rate.
Other assumptions
should be reviewed in light of current developments so we will have a
more effective program for attracting investments and translating a huge
opportunity into productive reality.
For comments/feedback e-mail to:
mbv_secretariat@yahoo.com. Readers may view previous columns at www.senatorvillar.com.
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