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Wanted: More Jobs. More Investors in the Philippines

It’s called a “fairy tale economic revival” by some. Others, like  Canadian Prime Minister Stephen Harper,  sees the Philippine economy as “an emerging Asian tiger.”  While the Philippines has the strongest economic growth in Southeast Asia and one of the world’s best-performing stock markets, its shortcomings are being laid bare. Stubborn problems have already started to undermine its economic renaissance.Philippines.

While foreign funds poured into Philippine assets in 2012,  driving the main stock index PSI up around 30 percent to a succession of record highs and lifting the peso currency about 7 percent, foreign direct investment (FDI) remains embarrassingly low.

Total FDI was on course to hit around $1.5 billion in 2012– about half its level in 2007 and less than the average $1.7 billion received every month in remittances from Filipinos overseas.

That is only about 3 percent of the total that flowed last year to a group of five peer economies including the Philippines in the 10-member Association of Southeast Asian Nations (ASEAN.)

So what are the problems?

1. In the World Bank’s “Ease of Doing Business” index, the Philippines slipped two notches to 138 out of 185 countries, near Tajikistan and Sudan. “It’s a lousy neighborhood. I do not want to live with that ranking.” said Guillermo Luz, head of the Philippines’ National Competitiveness Council. 

2. The Philippines has a low ranking in a range of categories, from “paying taxes” (143rd), to “starting a business” (161st) and “resolving insolvency” (165th.)

 3. The Constitution and current rules allow foreign investors to own no more than 40 percent in most industries and bars foreigners entirely in areas such as media and the practice of licensed professions such as engineering, law and medicine.

4.  Calls by congressional leaders to loosen constitutional restrictions on foreign ownership have met with a lukewarm response from President Aquino.

5. “I do not believe that foreigners would be that foolish to come here and put their money in business,” Juan Ponce Enrile, the Senate president who is calling for the Constitution to be revised, “They are at the mercy of local people who are not quite familiar to them. That is to me the reason why we lag in investment attractiveness in Asia.”

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6. The Philippines has one of the highest jobless rates in Southeast Asia at around 7 percent, and over 19% under-employed, helping to fuel an exodus of about 10 million Filipino workers in total that has yet to reverse course or even slow significantly. 

7.  The Philippines’ volatile political and legal systems regularly throw up unpleasant surprises for foreigners. Aquino’s government has halted new mining projects, stalling development of an estimated $850 billion in mineral reserves, until Congress approves a mining tax reform – a vote that is unlikely to take place before May 2013 mid-term elections.

8.  Last October, Manila added to restrictions on ownership of real estate, lending firms and professions.

9. When companies try to tap the domestic market in the Philippines they run a gauntlet of heavy bureaucracy, local government corruption and sometimes troublesome partnerships with Filipino firms.

Companies have to go through 16 separate procedures to start a business in the Philippines, compared with three in Singapore and nine in Indonesia, according to a World Bank report.

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10. While service sectors such as call centers, retail and tourism are growing strongly, the manufacturing sector struggles to compete with neighbors and attract investment. Ford Motor Co (F.N) announced last June it was closing its Philippine production factory, citing an inadequate supply network and a lack of economies of scale.

Economic fairy tale or emerging Asian tiger?  The absence of foreign direct investments is a missing link that raises doubts over how much has really changed in this nation of 96 million people, where many an investor has been stung by copious red tape, unpredictable policymaking and graft.

(Source: mb.ph.com)

11 thoughts on “Wanted: More Jobs. More Investors in the Philippines”

  1. as long as most businesses here still use carbon paper receipts and old 1960,s style typewriters to process your transactions this chunk of paradise is stuck in pergatory.

    Why do they use old manual finger busting typwriters and not old electric typewriters? Brownout proof hahahaha

  2. i was at sm yesterday looking at luggage,it is on average the same price for luggage in the ph as it is in the usa,no noticable savings here.

    Anyway while i was in the luggage dept i had 8,yes 8 luggage employees all gathered around me helping me to select luggage,every brand of luggage has its own promo rep and each one was pitching his product.

    One brand was actually made in the ph and the rep showed me the made in ph tag,it was a good sturdy looking piece of luggage with protected bag corners and other features comparable to more expensive bags,he even beat on the sides and back with his fist to show the sturdy wall construction,you dont get that kind of service at Wallmart.It was a buy the main suitcace and get 2 other luggage pieces with it free for 1600 php,the other pieces are a nice big carry on and a smaller tote bag,this looked like a good deal for what i needed it for,it was a 40% off list price sale for the ph product so maybe they arnt selling as well as the imported products,maybe people are relucttant to purchase made in the ph products.

  3. Dave

    Hopes no brown outs when i put business there, because only one hour brown out make business so mess and uncomfortable
    talking with clients… hope government officials there pay
    attention about the brown out in Iloilo. Have nice day.

  4. Hi Scott B.,

    Iam engaged right now selling jewelries, like silver links
    the popular anywhere here in the philippines, but of course
    has also roast gold, sellable now here in Manila. i saw last
    time when me and papaduck been there, only one silver store
    in SM Mall has. but i want to be a dealer and rent one place
    to be my office and hire an employees, conducting and give some
    trainings for my sales representative or sales ladies in the future. thats why were planning to buy a condo there in Ilo-Ilo
    but me and papaduck needs to conduct first a survey. I have also diffirent brands of clothes for men’s and women’s. have a nice day.

  5. hi anne,i am looking at condo in the future but other than the condo being built acrosss from the Sarabia there is nothing going on condo building wise.I would like a condo complex with a pool and a gym,not sure if the one across from sarabia has that but also if they are priced as they are like in cebu which are expensive i think i will just stay a renter.

  6. Dave, thanks for posting this story. I think that it is a “fairy tale economic revival” — an illusion. I am from Mexico and ever since I was a child, I keep hearing the same story: “Mexico is a few years away from becoming a first class nation.” or “Mexico is a few years away from becoming the next Canada.” When I was a child I used to believe this stuff, but as grew older I realized that it was just government propaganda to keep people hopeful. Mexico, just like the Philippines, relies on remittances and on it’s people going abroad (the USA). The 3 sources of income for Mexico are : Oil, tourism and remittances. Remittances are the number 1 source of income. Many pinoys will soon realize that this is just propaganda to keep them hopeful. A great pessimist like my self once said: “Hope in reality is the worst of all evils because it prolongs the torments of man.” Friedrich Nietzsche.

  7. Dave,
    With unemployment that high, how good really is the economy? If they could somehow become more business friendly, that would give the Philippines an opportunity to really improve. But like you said what are the chances for that. Take care

  8. I saw a report the other day that ranked countries in Asia as good places to visit. The Philippines ranked dead last with Syria. Not a very good rate…

  9. if the ph ranked higher alot of us expats wouldnt be able to live here for economic reasons,so i guess for alot of us to maintain in the ph we should hope that the ph remainns last in all catagories,selfish but thats the way it is.

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