Risky destination

HONOLULU – It’s good to know that Germany doesn’t want ties with the Philippines to revolve around a single issue stemming from a corrupt deal gone sour, even if it involves one of its largest private companies.

There are many aspects that can be enhanced in relations between two countries with the same democratic ideals, Werner Hoyer told me. Those aspects, he said, cannot be overshadowed by the travails of German airport operator Fraport AG.

Hoyer is the minister of state of the German Foreign Office, or deputy foreign minister – the highest-ranking German official to visit Manila in a long time. He is on a mission to strengthen Germany’s ties not only with the Philippines but also with the Association of Southeast Asian Nations (ASEAN) as a group.

On the eve of my departure for beautiful Hawaii, I was able to chat with Hoyer at a gathering hosted by Ambassador Christian-Ludwig Weber-Lortsch at the German residence.

Both Hoyer and Weber-Lortsch hailed the shared democratic values of Germany and the Philippines. Weber-Lortsch will miss this when he moves soon to his next assignment, Myanmar.

Hoyer admitted that his country has not paid enough attention to the Philippines, which he said shouldn’t be the case between two nations with a history of democratic struggle. Both are open societies, with a free press and strong human rights advocacy. Hoyer also cited the two countries’ shared commitment to the rule of law, although in our case this is an ideal rather than reality. He said Berlin “appreciated” P-Noy’s campaign against corruption.

I asked Hoyer why Germany hasn’t paid much attention to the Philippines. He said this might be because they have been too busy dealing with internal tumult since the fall of the Berlin Wall and the ensuing problems brought by German reunification.

Now that Berlin is casting its glance at the land of people power, the problems of one private German company keeps popping into view.

Hoyer emphasized that the German government has no involvement in Fraport, operator of Frankfurt Airport, one of Europe’s largest and busiest hubs. And he said his government should not align itself with those who engage in wrongdoing.

Reiner Allgeier, managing director of German logistics firm Schenker Philippines and president of the German-Philippine Chamber of Commerce and Industry, also told me that Fraport’s woes have little effect on German investments already in the Philippines. German BPOs in the Philippines are growing.

But both Hoyer and Weber-Lortsch noted that the unresolved dispute was keeping new German investments away, particularly from big-ticket, long-term projects that can span several administrations. No major German firm has expressed interest in the private-public partnerships (PPP), flagship investment program of the Aquino administration.

And no, you can’t shrug and say forget the Germans. Like it or not, the concerns and decisions of investors in Europe’s strongest economy have an impact on those of others in the European Union.

Now, added to the Fraport dispute is uncertainty over the fate of projects awarded by the Arroyo administration to companies in Belgium and France.

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Unless they are cronies of those in power, businessmen generally like genuine anti-corruption campaigns.

Those who abet the crime by paying grease money to facilitate transactions or giving fat commissions to win a government contract see corruption as an additional expense that, if there’s a level playing field, they’d gladly do without. Those who don’t engage in corrupt practices resent those who do, because the unscrupulous ones get an unfair advantage.

Therefore, considering that the Aquino administration has made the battle against corruption a linchpin of governance, foreign investors should be rushing to put their money into P-Noy’s Philippines, now open for business under new management. They should be supportive of the government’s efforts to extricate itself from onerous deals forged in the past.

But first you have to define support. If it means lauding the anti-corruption campaign, of course they will be supportive. But if it means betting on the Philippines big time with investments that can last at least a generation, well, money doesn’t grow on trees and is a cowardly commodity.

So while businessmen might believe that Fraport and its local partner PIATCO or Philippine International Air Terminals Co. deserve all their troubles, the other issues involved are still worrisome enough to make investors shy away: the uncertainty of long-term investments in the Philippines, and the country’s failure to guarantee the sanctity of contracts.

Hoyer stressed that while Germany moves to enhance relations with the Philippines, it could not compel its private businessmen to put their money where they don’t want to go.

The problem is compounded by the weakness of the rule of law in the Philippines. This compels prudent foreign investors to demand an arbitration clause in contracts. That clause allows them to go to an international arbitration body rather than a Philippine court for settling disputes.

An administration official intimated to me earlier this year that a settlement with Fraport was expected “soon.” Maybe I talked to the wrong power bloc.

Someone told me that P-Noy seemed “afraid to lose his virginity to something that might not be in line with his anti-corruption stance” by pushing for a settlement with Fraport and PIATCO.

Hoyer said the issue must be put out of the way soon as the two countries strengthen economic and friendly ties.

“We must move on,” he said.

Perhaps the Aquino administration needs to explain its case better to the world. It can present the impact of tainted deals on poverty alleviation in developing countries, while at the same time emphasizing the Philippines’ need for more job-generating large-scale investments.

P-Noy may be clean, but what happens if the next administration is headed by his political enemy and decides to cancel projects contracted under his watch? Or decides to review major deals so commissions can be demanded for a new project approval?

Investors are not risk-averse, but certain types of risks are worse than others and are avoided by prudent businessmen. The reputation of the Philippines as a high-risk investment destination must be dispelled.