The Daylight Summit

There will be no more backroom deals. No more midnight contracts. Everything will be fair and square. Those were the assurances of President Aquino during the launching of the Public-Private Partnership which he calls the "Daylight Summit" last Thursday. His strongest line was "You cannot deal with a government where the right hand is offering a handshake while the left hand is trying to pick your pocket." The Day-light, in a nutshell, seeks to initiate a firmer and more determined policy to ensure that investments, whether public or private, are made transparent every step of the way unlike the previous administration.  

Not that I was dismayed. In fact, and at least, in just six months in office, P-Noy has already made serious steps in fighting the "culture" that thrives in the government every time a new investment or venture is being put up in the country. He said "The government will provide investors with protection against regulatory risk." But it would have been more interesting if Daylight included a program to protect small businesses from that same regulatory risk.

To me, the context of his speech seemed to have put more emphasis on what the government can do to improve the business climate for investors who finance big ticket projects on infrastructure projects. It is my wish that Daylight would also provide the right environment for small businesses which I think suffer the most in terms of regulatory risk.

By definition, regulatory risk refers to a change in laws and policies pertaining to investment. The Philippines has been notorious for changing the rules in the middle of the game and a problem for most investors in the country, regardless of the size of the business. Regulatory risk may also come in a form of reneging a contract on the part of the government or dishonoring its commitment to award certain benefits to investors promised under specific laws. And when I said that small businesses suffer the most when policy changes occur, it is because they don't have the means to fight it out in courts.  

I remember very well when I was in the export sector, some years ago, how disappointed local exporters were of their unavailed tax credits promised under the Export Development Act. The government was unsure of itself whether to give those tax credits or not as it did not have any clear mechanics to award them. And as it turned out, those that got the tax credits were spurious companies which did not at all deserve to get a cent while those who dutifully complied with all the requirements did not receive a penny. The most that they could do was to complain. And even, until now, not all of them were paid of their tax demandable. If it were the exporters who owed the revenue department, they would have to pay for the late penalties or got sued for tax evasion. 

While transparency is important to reduce regulatory risk, but I think government should be able to convey its policy direction to investors right at the outset so there would be no oops and surprises later. The EVAT was a terrible example. While the intention was good, it was one hell of a headache for businesses to troubleshoot the confusion of their customers and suppliers. More than just transparency, investors want a certain amount of predictability -- its position in terms of intervention in regulating labor, taxes and commitment to contracts, how often does it change its policies pertaining obtainment permits and the fees.  

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In behalf of the administrators Taga Cebu fanpage (www.facebook.com/tagacebu), I would like to thank the volunteers and sponsors namely, Malayan Bank, Terra Manna Camping and Resort, Emma Garcia Baumann, and the nameless donors who have provided sacks of rice, vitamins, school supplies to the sick children of the Missionaries of Charity in Pasil last November 13, 2009. May God reward you for your generosity and benevolence and for making our Buhat sa Kalooy Project this month a super success!

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