Investment 101 and a weaker peso

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Ej Lopez

Ej Lopez

News of the President’s successful state visit to the US (which included a nostalgia trip to Boston), during which he earned goodwill and pledges of investments from foreign investors and Filipinos abroad, continue to dominate and hog newspaper headlines.

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But several foreign trips have been made and pledges of investments received yet nothing of significance has been achieved in this respect except for some empty promises. Although foreign direct investment (FDI) has increased through the years, it is still miniscule compared to our neighboring countries. The Department of Economic Research at the Bangko Sentral ng Pilipinas (BSP) said that FDI inflows in 2012 rose to $2.8 billion from the $1.8 billion recorded in 2011. But even during the term of former President Gloria Macapagal-Arroyo, FDI has already shown consistent growth.

Sadly, this growth in FDI still pales in comparison with that achieved in our neighboring countries. An Asian Development Bank study last year indicated that Indonesia and Thailand had higher FDI inflows with $19.8 billion and $8.6 billion, respectively, compared with our FDI, which was less than $2 billion. What does this say about our local investment climate?

Presumably, these are telltale signs that foreign investors do not have complete trust in our business environment. Despite continuous accolade from foreign credit rating agencies, this has not been enough to encourage FDI to pour into our economy. This is not surprising considering the fact that our local government leaders either cannot or refuse to get their act together. Instead of providing a more conducive business environment that will attract foreign investors, they make it difficult for investors to do business in the country. Is that the so-called “ease of doing business” in the country?

The hard-earned goodwill created by the foreign trips of the president has gone to naught because of bureaucratic “pestering”. Unless these people who are supposed to protect our local interest get their act together, it will not be far-fetched that, sooner or later, the Philippines will suffer the more serious problem of capital flight.

Peso continues to dip
The peso’s continued drop against the US dollar could either be favorable or unfavorable for our country. Given our relatively high unemployment rate despite the consistent growth of our GDP, the continued depreciation of the peso against the US dollar may be a welcome respite that could attract investment to our economy. It would mean that the cost of investment in the country is lower compared to when the value of the dollar was lower against the peso. The cost of products sold would be cheaper, likewise labor costs would be lower, and investors would enjoy a lower cost of production. The steady depreciation of the peso against the US dollar, though unfavorable to our exports, may be a way or an avenue to attract FDIs that the president has been trying to do with his state visits.

However, depending on the cost of borrowing, the peso’s depreciation could trigger an accelerated inflation in our economy. Unless the government can arrest the expected acceleration in price increase, local investment will be dampened by the high cost of borrowings resulting from inflation.
 
A suggestion to Sampaloc cops
The people of Sampaloc in Manila are pinning their hopes on the active involvement of the police authorities in putting a stop to the unabated, almost daily incidents of street robberies, hold-ups and muggings in the vicinity of Espana and Lacson Streets across the University of Santo Tomas (UST). Whereas before they were considered isolated and petty criminal activities, the frequency and boldness of the attacks have instilled fear and distrust among the people, particularly among students in the university area.

With the active commitment of our station commanders in the area, Police Supt. Aldrin Gran of Station 3 and Police Supt. Samuel Pabonita of Station 4, the people of Sampaloc can rest assured that these incidents that have continuously threatened our youths will soon be a thing of the past.

I hope this does not reach a point whereby PNP chief Alan Purisima himself will have intervene in order to put a stop to these criminal activities that have been going on for quite some time.

For comments e-mail: doc.ejlopez@gmail.com.

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2 Comments

  1. yung ngang mga local investors/businessmen ay nahihirapang kumuha ng business permit dahil sa kapal ng red tape lalo ng mahihirapan yung mga banyagang gustong magtayo ng negosyo dito. ang dami mong dadaanan para makakuha lang ng permit

  2. Cops are gone when Manila’s finest,are still around to name a few make their niche. The likes of Gen. Lim, Col. Maganto,Sgt. Bagallon to name a few. Now we are. Struggling with all these petty crimes when criminals are smarter than our policemen they know the tricks on how to deal with the police hooligans that had no thinkng in mind is to amass wealth and being double time showing 2 faces all the time to avoid being caught and persecuted. Public are at risk because of rising theory of conspiracy between criminal and policemen. Now you no longer no whose the threat and the real culprit, because at early dawn training are done, but no morality and decency. We need to train police basic ethics and make laws that when caught it will be grave or mitigated penalty at hand. These are two ways to correct these scalawags and get rid off fake and hooligans policeman.