THE government’s failure to honor its contracts with investors, as well as bureaucratic red tape in local governments continue to prevent the Philippines from attracting more foreign investments, according to a local think tank.
First Metro Investment Corp.,-University of Asia and the Pacific (FMIC-UA&P) Capital Markets Research said foreign direct investment (FDI) is the missing ingredient in the country’s growth story.
The recent decision of the government to review the concession agreements granted to Manila Water and Maynilad, as well as corruption in local government units (LGUs) make investors cautious about investing in the country, said the think tank.
First Metro Chairman Francisco Sebastian said the review of the water concessionaires contracts would make investors “more thoughtful” on how future contracts are drafted.
“But over the long run…this public-private partnership [PPP] is still very attractive. So I think in the end, we are not over that period of review but we’re optimistic that a good solution will be found,” Sebastian said.
“I think there have been some discussions. It will take six months to resolve these issues, but let’s not forget that underlying these projects are the real necessity for these infrastructure projects. So we think that the basic fundamentals of PPPs will, in the end, sustain itself and prove itself worthy of investment by both foreigners and locals,” he explained.
Business at local level
FMIC-UA&P Capital Markets Research economist Victor A. Abola said another setback is the business environment at the local level.
He said many LGUs make it expensive to start a business, or even expand a business by creating fees that are not part of the true costs of doing business.
By continuing these practices, Abola said, LGUs have prevented the country from attaining and maintaining a growth of 7 percent or more.
He said in one instance, he learned of a company that was required to pay a barangay captain P50,000 before it could get the necessary permits to expand its business.
On top of the money, Abola said the company was even asked to place one of the barangay captain’s people to work in the company, similar to a ghost employee.
“We should remove obstacles. One of the key obstacles for growth, I think, are the LGUs. We have allowed them to grow in power beyond their petty little turfs, and become an obstacle to growth,” Abola said.
In the World Bank’s Ease of Doing Business 2020, the Philippines improved its score to 62.8, landing it in the 95th spot of the survey—the second time it got that ranking.
Last year’s score was 57.68, a figure that plunged the country to 124th, from 113th in the 2018 edition.
The country ranked 32nd in getting electricity; 65th in resolving insolvency; 72nd in protecting investors; 85th in dealing with construction permits; and 95th in paying taxes.
However, Manila is lagging in terms of trading across borders (113th); registering property (120th); getting credit (132nd); enforcing contracts (152nd); and starting a business (171st).