Investment incentives: Does DTI know its job?

LOS ANGELES – Just before I left Manila, I had the pleasure of attending a session of the investment conference sponsored by the European Chamber of Commerce as part of their 30th anniversary celebration. I heard EU Ambassador Alistair Macdonald accuse the Philippines of suffering from “tower vision” with regards to Europe.

Many Filipinos, Mr. Macdonald observed, “seem to see Europe only in terms of towers – the Eiffel Tower, the Tower of London, the Leaning Tower of Pisa. In other words, a nice place to visit as a tourist, but not a global player, a global partner.” A few minutes later, DTI Secretary Peter Favila approached the same lectern to deliver his response and he opened his speech by saying that he thinks highly of Europe and in fact, he and his family love visiting Europe as tourists.

As a Filipino, I wanted to fall from my chair and hide under the table. My country’s trade secretary was either not listening to Mr. Macdonald or was too inept to change his ghost-written speech on short notice. I suspect he was just too dense to feel he was about to prove the accusation of the EU Ambassador on what afflicts the Filipinos in their view of Europe. Then again, what else is new! That’s Peter Favila!

In fact, I personally know of how little regard Mr. Favila has for Europe. When the German government and the ECCP worked to arrange for a Philippine trade mission to visit and their counterparts in Berlin a couple of years ago, Mr. Favila cancelled the visit at the last minute, as in less than a week before. He also gave no reason for the cancellation and didn’t apologize that the work of many months gathering credible business leaders from all over Germany was trashed.

I now know the reason for Mr. Favila’s snub. It was Germany’s misfortune that it didn’t have a Tower of London, a Leaning Tower of Pisa nor an Eiffel Tower. If it did, Mr. Favila might have even brought his family along. The Brandenburg Gate doesn’t quite make it for Mr. Favila.

I had the chance to talk to Mr. Macdonald the night before the conference during the 60th anniversary cocktails of Israel and he gave me the impression that he is very worried about the state of our trade relations with Europe. He gave me some facts and figures, the same ones he gave during his ECCP conference speech the next day. And he has reason for concern.

Philippine exports to the EU, he pointed out, have been declining, at an average rate of 6.1 percent per year – from 7.1 billion euro in 2003, to 5.6 billion euro in 2007. And this at a time when exports from ASEAN as a whole to the EU were growing at 4.9 percent per year, with Vietnam in the lead (12.7 percent), followed by Thailand at 8.7 percent, Cambodia at 7.9 percent, Indonesia at 4.9 percent, and Malaysia at 3.2 percent.

I told him that perhaps there are problems of access to European markets. But he quickly replied that if our neighbors were able to penetrate the European market, there is no reason why we have failed to do that. And he is right.

Then he diplomatically offered a plausible reason: perhaps we do not know Europe enough. There is a problem of language. And only one European airline flies directly between Manila and Europe. Then he said in his speech that “there is an inadequate recognition in the Philippines, among decision-makers in both the public and the private sectors, of just what the EU has become, of the role the EU plays in today’s global market-place, of the scope for stronger economic and political ties with Europe.”

Mr. Oscar Lopez, who co-chairs the Philippine German Business Council, acknowledged the problem when he accepted an award of recognition from the ECCP a few days later. “I share the bewilderment of the European community as expressed by Ambassador Allistair Macdonald,” Mr. Lopez said, “about the hesitance of the Philippine government to enter into a modern Partnership and Cooperation Agreement. I also share his worry about what he calls ‘uncomfortable facts’ in relation to our export performance in the European market.”  

Mr. Lopez agreed with Mr. Macdonald that the Philippines should take full account of the trade and investment partnerships with the EU, given its market of 500 million consumers ready to buy quality products and services at quality prices. It seems to me, Mr. Lopez said, that the little we have by way of exports to the EU is dominated by Claus Sudhoff’s garments business out of Cavite’s EPZ. “I guess we need to convince our trade officials as well as our key exporters to expand their global perspective.”

As if the problem with Europe isn’t serious enough, the DTI chose to ignore the foreign chambers of commerce in drafting this year’s Investment Priorities Plan. Of course the chambers expressed disappointment that their representatives were never invited to the public hearings conducted by the Board of Investments (BOI) before the IPP was finalized and submitted to Malacañang for approval. Had they been invited, the Foreign Chambers of the Philippines said they would have raised several issues that they feel are important to the foreign business community.

It sounds basic to me that you must do market research before launching something like the IPP. That means talking to the target market of foreign investors and finding out how their opinions can make your plan more acceptable to them. But with DTI under Favila, basic things can’t be taken for granted. Someone must pound those to their heads.

Now, there is added threat by the predilection of our bureaucrats and politicians to fix what does not need fixing. A case in point is a bill pending in Congress that would transfer control of the Bataan Export Processing Zone from PEZA to the Bataan provincial government. Foreign investors in the zone are now worried that the professional management of PEZA is being substituted with the unpredictable management by local officials.

One of the BEPZ locators wrote me to say that “at least under PEZA we are not subject to political whims of the local politicians. What is even more frightening there is no mention about our contracts with PEZA.  As you know the Philippines has a reputation for not honoring contracts… We entered into these contracts with PEZA years ago in that after we all found out PEZA offered the best benefits to us. Now we are all wondering if these contracts are worth the paper they are written on.”

The locator went on to say that “under Director De Lima the zone has been run very good and if there is a problem it is attended too. I for one want to stay with PEZA in as much as they offer fine incentives already.  I have noticed that when politicians get involved in running zones no good comes to the investors located in them. I myself am proud to be a member of the PEZA family of companies.”

And speaking of PEZA’s Lilia de Lima, I still have to find out the real reason why she was moved to the Human Rights Commission. It doesn’t seem like a promotion. She is doing well in her present job and respected by the investors. She seems happy in her job too. So why the change?

Bad risk

Norbert Goldie forwarded this one.

A guy walks into a library and says to the prim librarian, “Excuse me Miss, do you have books on suicide?”

To which she stops doing her tasks, looks at him over the top of her glasses and says, “F..k off, you won’t bring it back!”

Boo Chanco’s e-mail address is [email protected]