By Keith Richard D. Mariano,
THE PHILIPPINES is proving to be a critical investment gateway to the emerging Association of Southeast Asian Nations (ASEAN) market, a role underscoring the need to expand its capacity to take in the inflows.
This, among others, was one of the insights shared by leaders of multinational companies at the BusinessWorld-PAL ASEAN Regional Forum in Pasay City last Nov. 24, reaffirming the economy’s attractiveness to foreign investors.
“[T]here are not many growth markets around the world anymore,” Henry J. Schumacher, senior adviser at the European Chamber of Commerce of the Philippines, said in a presentation. “Today it’s ASEAN, and the Philippines is very much part of that.”
Mr. Schumacher cited the manufacturing and the information technology-business process outsourcing (IT-BPO) sectors among the growth drivers of the domestic economy.
In the BPO industry, more companies continue scouting for expansion opportunities in the Philippines particularly in the countryside, TELUS International Philippines Regional Vice-President Rajiv Dhand noted in a separate presentation.
“We’re looking at the idea of this administration to decentralize and regionalize. I think this is the question that I’m concerned with previously: How do people, how do business, in central Luzon and central Cebu move to the countryside?” Mr. Schumacher said.
“The 10-point agenda makes it very clear that this is going to happen and should happen,” Mr. Schumacher added, referring to the socioeconomic program of President Rodrigo R. Duterte’s administration.
The agenda includes continuing current macroeconomic policies that include fiscal, monetary, and trade thrusts. The government also aims to promote rural and value chain development to increase agricultural and rural enterprise productivity and rural tourism; and ensuring security of land tenure to encourage investments and address bottlenecks in land management and titling agencies.
Besides looking outside key cities, outsourcing companies are moving to higher-value and more sophisticated IT-BPO services, Mr. Dhand said.
In its socioeconomic program, the Duterte administration committed to investing in human capital development and match skills and training to meet the demand of businesses and the private sector; and promoting science, technology and the creative arts.
PRIVATE SECTOR HELPS ECONOMY ABSORB MORE INVESTMENTS
In expanding the economy’s capacity to absorb more investments, the private sector plays an equally important role.
Listed property developer Megaworld Corp., for instance, attracts investments beyond the traditional business districts in the National Capital Region through its pioneering mixed-use properties called townships mostly located outside the metropolis.
“In 1997, we brought a new concept and we presented it to the Philippine Economic Zone Authority (PEZA) about having an IT Park,” Megaworld Senior Vice-President Jericho P. Go said.
“What PEZA had before was an industrial park and that is very different because it’s outside Metro Manila, so we provided them research of what we’ve done in Bangalore in India. We also went to Singapore and this allowed us to make a proposal to the government to be the very first IT Park which is now known as Eastwood City.”
The township model, which Megaworld has since adopted in 21 developments across the country, include residential, commercial and leisure spaces catering to the needs of the employees.
“We have already expanded this proof of concept to other parts of the Philippines, particularly in Fort Bonifacio, where we have one of these developments. I think this is very important because it provides opportunities for growth, as we encourage more of the BPO companies to locate in the Philippines.”
Meanwhile, ride-hailing application Uber seeks to help solve the worsening traffic situation in Metro Manila, which the Japan International Cooperation Agency estimated to have cost the economy P2.4 billion a day in 2014.
Uber Country Manager Laurence Cua attributed the congestion of the metropolis’ roads to the growing number of Filipinos who can afford to buy their own cars.
Vehicle sales in the Philippines have supposedly tripled over the last 10 years, with 300,000 new cars hitting the road in 2015 alone.
“And you know what, when we looked at the data, that problem isn’t really going to stop because every developed economy in the world has seen that when their GDP per capita starts going above $4,000, people start buying their cars,” Mr. Cua said.
To ease traffic in the region, Uber has made ridesharing and carpooling among Filipinos through its mobile application.
GETTING ‘REAL’ ABOUT FOREIGN INVESTMENTS
At the regulatory front, the member firm of PricewaterhouseCoopers (PwC) in the country, Isla Lipana & Co., noted that foreign investors actually have less to worry about.
“While foreign investments are coming, the fact is the Philippines remains to be an investment laggard in Asia,” PwC Philippines Chairman and Senior Partner Alexander B. Cabrera said in a presentation to the forum.
“And while everybody gets very excited about the possible lifting of foreign equity limitations or most hindrances to foreign investment, the fact is, even the government admitted that it may take about three more years thereabouts before anything can happen with the amendment of our constitution to lift these constitutional limitations.”
In the meantime, businesses can live with “the realistic things” as in the case of Uber, Mr. Cabrera noted.
“This is a rider app that’s providing transport services — one example of a 100% foreign entity engaged in that general area without engaging in that restricted area of servicing the public. Uber provides the app and booking service while the drivers own the cars and provide the public service.”
Mr. Cabrera also cited the possible rationalization of incentives given to businesses among the concerns of foreign investors. Yet, registering with PEZA could supposedly offer a solution.
“Corruption is still an issue for multinational corporations in the Philippines,” Mr. Cabrera further noted. “My message really is you can do business in the Philippines everything above board on parallel dealings.”
Businesses supposedly have a part to play in fighting corruption by sticking to the rules and shutting down under-the-table dealings, according to PwC Philippines.
“Because we have always dealt on an above-board basis, we fear no one. We go to Malacañang, we go to Supreme Court, we fear no one. This is also a message to multinational companies,” Mr. Cabrera said.
The PwC Philippines executive allayed concerns about Mr. Duterte’s bias against labor contractualization as well, saying: “I’d like to tell you that the labor law has not changed. The basic law did not change.”
The country’s labor laws allow companies the flexibility of contracting of labor when the need for a bigger work force arises, provided that workers under such an arrangement receive the benefits due them.
Nevertheless, the Duterte administration has committed to implementing reforms aimed at making doing business in the Philippines easier. And the private sector continues banking on that promise.
“I am convinced that this is something that we are really trying to get across, that the Philippines is an ideal jumping board into the ASEAN market,” Mr. Schumacher said.