The need for investors, focus, and speed

The Philippine Stock Exchange reacted positively a day after President Aquino delivered his fourth State of the Nation Address (SONA) before a joint session of the Senate and House of Representatives to mark the opening of the 4th regular session of the 16th. The President highlighted his administration’s accomplishments in education, agriculture, health services, disaster management, defense, and the economy.

The economic figures show definite signs of improvement. The recent credit rating upgrade to investment grade and the 7.8% Gross Domestic Product (GPD) growth are getting the serious attention of investors.

Reports from the National Statistics Coordination Board (NSCB) also show that the Philippines had the fastest growing economy in the region during the 1st quarter of 2013. These are very encouraging signs that our country is starting to move in the right decision.

However, there seems to be a puzzling situation: jobless growth and comparatively low foreign direct investments. Level of unemployment and poverty have not changed according to the National Statistics Coordination Board and National Statistics Office. Income disparity has not improved either.

According to reports from the Asian Development Bank and the World Bank, we need to create more jobs to reduce poverty and sustain economic growth. If we look at the experience of our Asian neighbors, huge investment inflows in manufacturing, agriculture, mining and infrastructure instantly opened millions of job opportunities for the entire human resource spectrum. Economist like Gerardo Sicat also point to a need for government to tap the private sector for investments that will generate large scale employment opportunities.

This brings us to the PPP initiative of the Aquino administration which generated so much excitement as a strategic program that will haul the country’s aging infrastructure. However, government’s velocity to get these projects moving needs to keep up with the hype. After  3 years, the potential now needs to become a reality and P-Noy has the political capital to unleash what may be an unprecedented infrastructure boom that will hopefully sustain and accelerate growth in all industries.

The big investors that the country need are looking for the most ideal environment where they are confident of a stable, predictable and acceptable return on their capital. They diligently evaluate the integrity, stability and efficiency of governance systems, peace and order, adequacy and efficiency of infrastructure and stability of the policy regime. In other words, how easy is it to do business in the Philippines? All these are taken into consideration and are compared with other emerging economies in our region. In a region of emerging economies, our Asian neighbors are our toughest competitors.

Infrastructure is definitely a concern that immediately hits all visitors when they land in our airports and experience Metro Manila’s road traffic. Our infrastructure is the least ranked according to the World Competitiveness Report. The embarrassing reputation of the NAIA as one of the worst in the world in terms of maintenance and service, delayed flights blamed on airport traffic and the inefficiency of our domestic airports will spoil our “It’s more fun” campaign.

There have been excellent pockets of development that will awe some “balikbayans” who have been away for a decade or two. A good example is the NLEX and SCTEX to Subic, Zambales which has become a pleasant and scenic day trip to Metro Manila. This is the kind of infrastructure that has not just a wow effect but has long term positive impacts to all the provinces along and beyond the span of the expressway. More super highways, Light Railway Systems, airports, ports and a north to south train network will boost business activity and efficiency in Luzon and should be replicated in Mindanao should the peace process finally succeed.

Still confusing and in even scary for potential investors are the bureaucratic maze and unstable regulatory policies that has cost billions of dollars lost in failed government contracts. Just to start a private enterprise is a challenge and takes too much effort compared to Hong Kong where you can put up a company in one day.

Our “freestyle” democracy has spawned the rise of what I might dare to say too much activism. There seems to be too much noise not just from the leftist NGOs but also from some in the executive, legislative and judiciary. The church and media also contribute to too much static that will cause any government to trip and lose focus on the more urgent economic issues. This disunity wastes valuable resources and time that is better spent in creating wealth. We keep on shooting ourselves on the foot and we lose investors to other countries that give them more comfort and confidence. Now we are even seeing local investors looking at other countries for investment opportunities.

But this is not to say that government has not succeeded in its efforts. Understandably, reversing decades or for some of us, a generation of underdevelopment will take time. Take our monetary policies for example. It took the Bangko Sentral ng Pilipinas (BSP) two decades of policy and structural reforms thru so many administrations to result in the stable and resilient economy we are currently enjoying.

Compared to the past administrations that have been associated with corruption and inept bureaucracies, the current administration has had the highest satisfaction, performance and trust ratings. There is significantly changed perception of a more transparent government. In fact, the Philippines improved by 24 points in the latest Transparency International Corruption Perception Index.

Financial institutions such as the International Monetary Fund (IMF), World Bank and Goldman Sachs, among others have likewise remained optimistic of their growth forecasts for the country. Even the National Economic Development Authority said that they are likely to revise this year’s growth targets. This will only be possible if we focus on the areas that have to be dealt with like the need for more Investments, jobs, and infrastructure.

 In his recently concluded State of the Nation Address, Pres. Aquino affirmed that the government will do Its part in its good governance agenda but also called upon the active participation and vigilance of the citizenry and the private sector as partners in growth and development.

 The government is indeed doing its part, balancing politics with an economic and governance agenda that may change the old corrupt system to a dream system that will give historical credit to P-Noy’s administration. The most recent Social Weather Station Survey shows 76% of Filipinos expressed their satisfaction with the President while Pulse Asia showed 73% approval of his performance and a very high 77% trust rating. A very strong sign of confidence in P-Noy’s administration, but many are starting to feel that the projects and reforms are just taking too much time.

 We need to lessen the counterproductive noise and stay focused on institutionalizing game changing and investor friendly reforms that will set us up for a new era of prosperity. A need for speed will definitely be good for us.