Good governance, other reforms key to attracting 30% more foreign capital

Foreign investments in the country can increase by up to 30 percent if the government adopts internationally-recognized good governance practices, a former Cabinet member said yesterday.

Dr. Jesus P. Estanislao, former secretary of finance and now chairman of the Capital Markets Development Council (CMDC), said in a press conference that one reason why the Philippines and its Southeast Asian neighbors are losing out to the People’s Republic of China (PRC) in terms of attracting foreign investments is because PROC has adopted a code of good governance.

He noted that foreign investment have poured at least $45 billion in China. "On the other hand, Southeast Asia received a measly $9 billion due among other reasons to its notorious corporate practices," Estanislao, who is also the president and chief executive officer of the Institute of Corporate Directors (ICD), said.

However, Estanislao is optimistic that this will change in the near future when President Arroyo signs next week an executive order prescribing a Code of Proper Practices for Directors with necessary amendments to the Corporate Code of the Philippines.

"With the code, the country will have a road map and that would bring back the Philippines on the radar screen of foreign investments," Estanislao said.

The major targets for reforms are banks, government financial institutions (GFIs) and publicly-listed corporations.

A key reform involves the cooperation of the judicial system. "The judicial system in the Philippines is notorious in the issuance of temporary restraining orders (TROs) which interfere in corporate affairs of private firms," the ICD head said.

A similar complaint was aired by members of the Makati Business Club (MBC) during public consultations on the money laundering issue.

Businessmen want the country’s judicial system not to interfere in possible investigations by the Anti-Money Laundering Council (AMLC).

The issuance of the EO, the adoption of the code of proper practices which was recognized by the Asia Pacific Economic Council (APEC), and the amendments of country’s corporate code would put the country in the forefront of Asian countries which has formally adopted the code of good governance.

Other areas of concern are graft and corruption in all levels of government and a pathetic tax collection record.

There is a perception in the global business community that corruption in the Philippines is so serious that it has a direct impact on revenue collection, which in turn results in a huge budget deficit.

In 1996, the Philippines was ranked 31st most competitive in a list of 47 nations surveyed. The country maintained its position until 1998 when it slipped one notch lower to 32nd. However, the country dropped to 38th within the first year of the Estrada administration and further down to 40th this year.

Estanislao said the CMDC had been instructed to formulate a national good governance program for all government agencies starting with the financial and securities agencies.

Among its possible features are oversight committee for all government agencies including its line agencies. These committees would then report to the CMDC which in turn would report directly to the President.