Instead of pulling in foreign investments, the administration of President Aquino seems to be sending a signal driving away capital as indicated by the latest Bangko Sentral ng Pilipinas (BSP) figures showing foreign direct investments (FDI) dissipating 83 percent to a mere $13 million in August from $76 million a year ago that brought FDI in the year to August to $1 billion, one of the lowest among developing countries in the Asian region.
The BSP admitted the low FDI inflows were a sign of investors’ worry to bring in more capital to the country.
Just recently, Aquino issued Executive Order 98 which expanded the so-called negative list in local business that earned several complaints from foreign trade groups.
Net inflows for August consisted mainly of equity capital that reached $42 million, up by 35.5 percent from same period last year. Gross placements of equity capital came from the US, Macau and Japan and were channeled to real estate, transportation, storage and manufacturing sectors.
Very recently, Quezon Rep. Danilo Suarez cited that the country’s FDI is the lowest among Asean and only beats Laos at $900 million. Singapore ranked first with over $24 billion FDIs while Thailand is next at over $8 billion.
BSP data showed gross equity capital placements reached $1.3 billion for the eight-month period from just $400 million last year, according to the same data.
Inflows were poured into manufacturing, retail, financial and insurance, mining and quarrying from United States, United Kingdom, The Netherlands, Australia, Japan and Bermuda.
Members of the European Chamber of Commerce (ECCP), in response to EO 98, stated that Aquino should be instead relaxing the restrictions on foreign investments.
ECCP president Michael Raeuber said the group is for the opening of markets and liberalizing the so-called negative list.
Former ECCP president Hubert d’Aboville added that increasing the restrictions on foreign investments limit job opportunities for Filipinos. “The more you limit, the more you stop foreign investments, thus, reducing the capacity of creating jobs,” he said.
The country needs to attract much higher levels of foreign direct investments (FDIs) to achieve sustained and inclusive high growth rates, former Budget Secretary Benjamin Diokno also said.
“Foreign investors are unimpressed with the reforms put in place by the Aquino administration,” he said.
The $1 billion in FDIs thus far which was already an improvement from last year pales in comparison to what the country’s neighbors are getting. Thailand, for instance, received $1 billion in investments for just the first two months of the year.
The investment areas and economic activities reserved to Philippine nationals under the 9th Regular Foreign Investment Negative list was increased, Executive Secretary Paquito Ochoa Jr. said.
According to Ochoa, EO 98, signed by the President on Oct. 29, 2012, replaced EO 858, which has been in effect since Feb 2010.
The 9th Regular Foreign Investment Negative List enumerates the industries and business activities that are open to Filipino businessmen, and defines the extent of participation of foreign investors in areas allowed by specific laws and the Constitution.
“There are investments areas or activities which foreign ownership limitations imposed by law were not included in EO 858. Those changes are now reflected in the ‘List A’ of the new presidential directive,” Ochoa explained.
Among the amendments, Ochoa said, are the foreign ownership and foreign practice limitations imposed under the Real Estate Service Act of the Philippines (RA 9646), the Philippine Respiratory Act (RA 10024) and the Philippine Psychology Act (RA 10029) – all enacted in 2009 – and the Lending Company Regulation Act of 2007 (RA 9474).
Except for RA 9474, which allows foreign ownership of up to 49 percent in lending companies, the three others limit the practice of non-Filipinos in the areas of real estate and health care such as respiratory therapy and psychology, unless there is a reciprocity arrangement prescribed by a law.
List A of EO No. 98 specifies the areas of economic activity where foreign ownership is prohibited or limited by the Constitution or laws, among them the mass media, practice of all professions, cooperatives, private security agencies, small-scale mining, private radio communications network, private recruitment for local or overseas employment, advertising, ownership of private lands, lending companies, financing companies and investment houses regulated by the Securities and Exchange Commission (SEC).
“List A may be amended any time to reflect changes brought about by new laws. List B may be amended not more than once every two years upon the recommendation of the departments concerned and endorsed by the National Economic and Development Authority, or upon Neda’s own initiative and recommendation, approved by the President and promulgated by a presidential proclamation,” Ochoa said.
Source: The Daily Tribune; Front Page; 13 November 2012
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