No wonder foreign investments aren’t coming in.
While the Philippines’neighbors are awash with cash from global investors, the country is only receiving trickles because its tax laws keep changing every so often, and incentives are granted and removed seemingly based on the whims of the administration in power.
By all accounts, the country should be one of the best places in this part of the world to invest in. Its economy is growing at a healthy clip. Its stock market is hitting peak after peak. Its gross international reserves are overflowing.
Aside from these, the business process outsourcing and tourism industries are performing exceptionally well, and consumers are spending freely on homes, cars, and the usual essentials.
Despite this, foreign investors still prefer to place their funds in such places as Vietnam, Malaysia and Indonesia, among others.
There, they know that a government’s guarantee is as good as it gets. No frivolous changes take place. Moreover, the foreigners compete on equal footing with local businessmen. This is the level playing field that is much talked about but not understood by large segments of the Philippine business community, whose leaders feel that foreign competition is unfair.
Nothing could be further from the truth, of course. Protectionism has gone the way of the dodo—obsolete and actually counter-productive to growth. Worst of all, protectionist policies make local industries inefficient.
In a couple of years, the Association of Southeast Asian Nations will have a unified market not unlike the European Union. This means goods and services produced by all Asean member nations will have access to a market of more than 600 million.
Sadly, the Philippines shows no signs of being prepared for this development, as many a foreign investor has pointed out.
The country’s lack of preparation for both regional and global competition is becoming more and more apparent, and unless corrective measures are in place, the Philippines could again be relegated to its former position as the “sick man of Asia.”
It will take a lot of doing, but the Aquino administration’s economic cluster should take the lead in correcting the ills in the country’s investment climate.