Europe-PH News

To say it was a good year for trade and investments is an un­derstatement.

Investor confidence soared in 2013 on the back of perceived signifi­cant improvements on governance, intensified drive against corruption, the country's favorable and robust economic performance, as well as the ratings upgrade granted by credit­rating firms.

Such developments were reflected in the numbers, whether in terms of a rise in the investment pledges of both local and foreign firms, the number of trade missions pouring in the country, and the significant jump in rankings in the various global competitiveness surveys released in 2013.

More notable, however; is the rela­tive "ease" in swaying investors to look at the country as a lucrative site for new businesses or expansions. As one trade official put it, the gov­ernment no longer needs to "beg" for time from investors to take a second look at the Philippines.

Even Trade Secretary Secretary Gregory L. Domingo remarked that 2013 was "almost too good to be true," save for some hiccups that di­verted government and private sec­tor resources to relief and rehabilita­tion efforts.

'Distracting' events

"The year 2013 was very good economically as far as trade and in­vestments were concerned, but was distracting because of many events and developments including the spillover effects of Typhoon Pablo [in 2012], the Zamboanga standoff, the 7.2­magnitude earthquake in Bohol, Typhoon Yolanda, and the priority development assistance fund (PDAF) issue," Domingo explained.

It's not that these reduced poten­tial for further growth, Domingo said, but these events were "distract­ing" because the focus was diverted. "Of course that was appropriate. We really needed to divert our atten­tion to save lives. But this had a huge impact on businesses because a lot of the logistics capacity were taken up by relief efforts," he added. In a separate interview, Trade Un­desecretary Ponciano C. Manalo Jr. pointed out that the good gover­nance measures implemented by the
Aquino administration have been the driving factor in the upgrades from major global ratings agencies and the rise in competitiveness rankings in 2013.

"Business and economic reforms introduced by the government are now starting to be institutionalized which should bring even more confi­dence from global investors to locate in the Philippines," Manalo ex­plained.

Even local and foreign business chambers are lauding the current ad­ministration for the notable reforms that were implemented in the first three years of President Aquino's term.

Henry Schumacher; vice president for external affairs of the European Chamber of Commerce of the Philip­pines (ECCP), noted that the Aquino administration had "done well" in 2013 by addressing corruption and supporting a number of tax measures through Congress, such as the Sin Tax Law and the Law eliminating Common Carriers Tax and Gross Philippine Billing for passengers.

The administration, Schumacher pointed out, was able to achieve rat­ing increases and "nurture" the coun­try's economic growth (GDP). John D. Forbes, senior advisor at the American Chamber of Com­merce, similarly noted that the "high economic growth rate achieved in 2013 -- despite weak growth in ma­jor external markets -- demonstrated the positive results of the administra­tion's reforms over the last three years."

"Increased spending on infras­tructure, improved budgeting procedures, targeted improve­ments in low­ranked indicators in global ratings, growing interna­tional tourist arrivals, more PPP projects rolled out than ever be­fore, initiation of improved educa­tional and public health pro­grams, and CCT, are among the significant reforms," Forbes said in a separate e­mail.

The Philippine Chamber of Com­merce and Industry also acknowl­edged that the local economy had been growing faster than forecasts, which demonstrated the resiliency of business conditions in the Philip­pines, PCQ president Miguel B. Verela earlier said.

Varela had said that the Aquino ad­ministration's "Daang Matuwid" pro­gram had been an inspiration for the business community to cooperate with government. This had also paved the Way for investor confi­dence to return and further improve as companies doing business in thePhilippines have experienced a de­cline in incidences of corruption in public contracts.

But such reforms are obviously not enough. While the local economy contin­ues to gain, the benefits do not trickle down to the grassroots where these are most needed. Limited progress has been noted in many critical areas, which should be addressed to effect lasting gains for the country.

'More work, less talk'

Sentiments of the business groups also boiled down to this: more work and less talk, more reforms and less politics and bureaucracy Decisive ac­tions by the government are neces­sary more than ever to sustain the momentum gained in the first three years of this administration. Other­wise, the achievements of the past years will only come to naught.

"Less study and talk and more ac­tion are needed to sustain and in­crease high growth in a country with such a large and growing popula­tion," Forbes stressed.

Forbes noted that "inclusive growth remains out of reach for this administration -- as it was for its pre­decessors -- and poverty remains far too pervasive."

"No matter how honest or smart the national government is in the Philippines, it still operates within an environment of restrictive laws (in­cluding the economic provisions of the Constitution), a vocal media, burdensome bureaucrat traditions, a flawed judicial branch, and—as 2013 proved—Mother Nature's worst disasters," Forbes explained.

Schumacher meanwhile, pointed out that "very limited progress" had been made in developing transport infrastructure. "The extreme delays under the su­pervision of the Department of Transportation and Communications will haunt the Aquino Administra­tion. Sustained economic growth can only be achieved if the supporting in­frastructure is in place," Schumacher
said.

Limited success

'Another area of limited success is the failure of getting inclusive growth going and address the related issues of un­ and under­employment and consequently the failure to address poverty alleviation. Attached to this issue is the fact that the Philippines is not getting the foreign direct invest­ment that is needed to drive produc­tive, long­term investment that will get people employed," he noted.

Schumacher likewise said that the government put "too much focus on revenue genera­tion and too little
focus on why for­eign investors are not investing here."

"The issues of long­term commit­ment, no mid­stream changes, hon­oring contracts, delivering on incen­tives promised investors have to get higher priority," he stressed.

The PCCI said late last year that 2014 would be a critical year for the Philippines, as it prepares for the for­mation of the Asean Economic Com­munity in 2015. Aside from the wish list it submit­ted to the government in October last year; the PCCI had again renewed calls for the government to address the so­called "constraints to high growth."

"This year is a critical year to take decisive action... We could lose out to our competitors if we delay in re­ moving the constraints that have been making us just play catch up," Verela said in a yearend briefing held late last year.

The government, he had said, could clear the list of constraints by ensuring the adequacy and cost­ competitiveness of fuel and electrici­ty to power the growth of industries; and rehabilitating, expanding and modernizing airports and seaports to accommodate the growing number of tourists and rising volumes of trad­ed goods domestically and interna­tionally.

The government also has to con­struct roads, rails and bridges with priority given to linking airports and seaports to cities and farm­ to­ market, roads; streamline business permits and licenses; and improve customs administration and procedures.

PCCI also stressed the need to strengthen the country's capacity to participate in regional trading activi­ties and improve education stan­dards.

"Certainly, the rosy picture painted by our economic managers could re­sult in the transformation of the Philippine economy into a power­ house economy if the government, with the support and partnership of the private sector, is able to address the constraints to growth," Verela had said.

Source: Philippine Daily Inquirer, 10 January 2014