Not long ago, the Makati Business Club and the Philippine Chamber of Commerce and Industry, two of the biggest and most influential aggrupation of businessmen in the country, urged our government (both executive and legislative) to put their acts together and address the pressing issues brought about by the imminent integration of the ASEAN region by the end of 2015.
Among others, inadequacies in utilities (like water and power) and infrastructures (like roads, airports, seaports, etc.), as well as, the restrictive foreign investment provisions in our constitution were raised.Supposedly, if timely addressed, these will help us in sustaining our present economic growth and propel us towards attaining inclusive growth through more job opportunities.These are job opportunities that can only be created by encouraging fresh investments (whether local or foreign).
Realistically, however, local investments could hardly put a dent on our unemployment woes. Their (locals) capitals have already been placed and possibly exhausted. Thus, there is an apparent need for foreign direct investments or FDIs. So that, last Monday, in President Benigno S.C. Aquino III’s (PNoy) State of the Nation Address, there was much anticipation as to what his policy statement shall be as far as FDIs is concern.
However, probably riding on the tag that our economy is one of the fastest growing in Asia, PNoy must have been in the belief that what we’ve so far done are all appropriate and will bring us to our dreamed target. That there is absolutely nothing to change. Thus, the non-inclusion in the SONA.
Truth be told, the size of our economy is one of this region’s tiniest. So that, it follows that our base figure, year after year, is too small. Therefore, increases in percentage points maybe high but the absolute amounts are just too little. Hence, when weighed against that of other ASEAN countries, ours will surely pale in comparison. Going deeper, it will clearly show that we are undercapitalized and are technologically inept. The root of the problem-the apparent lack of incentives for foreign investments. Despite these realities, however, our government has remained adamant in giving additional incentives to prospective foreign investors.
True, as mentioned by PNoy in his SONA, in just four years,we’ve gathered substantial investmentsthrough the Philippine Economic Zone Authority. This is, indeed, true, as major cities, like Metro Manila and Cebu, have become havens of FDIs. Notably, however, these FDIs have been so focused only on business process outsourcing. Cautiously, while the contribution of the BPOs gives us a sense of fulfillment, the harsh realities can also be warily a source of discontent. For one, in our quest to attain inclusive growth, the BPO industry does not contribute so much. This industry employs not only the well-educated but the best among them. Thus, though they claim to have boost taxi drivers’ income in a sense, they don’t directly give opportunities to individuals who are among the inadequately educated, the poorest of the poor, so to speak.
Moreover, this kind of investment is just a rung higher than portfolio investments or “hot money”. Truth to tell, while they employ a lot, they don’t bring in huge investments for capital expenditures. They simply rent on IT-ready buildings and buy IT related equipment. So that, even at a loss of a major customer overseas, they won’t even bother look for another one, they simply leave and close. Worst, some of them may just even leave their employees to scavenge for whatever furniture, fixtures and equipment left in the office for their separation benefits.
Why are we getting FDIs that are so BPO-focused isn’t difficult to decipher. These BPOs are mostly 100% foreign owned and by the nature of their businesses (export of services) are allowed by law to be such. Since they don’t need to construct manufacturing plants or factories but just rent offices, it suits them. By the same token, FDIs that are geared towards manufacturing activities are hesitant. For one, they won’t pour in millions of investment and construct buildings on lots that they can’t own. As the law provides, they need to have partners in a 60:40-corporation and with them as minority to buy land. As the story has always been, they use dummies and, more often, end up in court for ownership battles. Consequently, they are discouraged and are discouraging other prospective investors to invest.
Thus, as far as FDIs that are geared towards manufacturing is concern, when weighed against that of other key cities in Asia, ours will surely pale in comparison. The main reason-the apparent lack of incentives. Despite these realities, however, our government has remained adamant in giving additional incentives to prospective foreign investors because, as they claimed, due to some nationalistic fervor.
This point of view is simply baloney. Having FDIs that are geared towards manufacturing bring about employment among the less educated and the poorest of the poor. There is absolutely no better nationalistic view than giving the poorest of the poor the chances to work and the opportunity to live and not merely exist.