The Philippines, despite registering solid economic growth rates year after year, is still the sick man of Southeast Asia when gauged in terms of foreign investments.
Decades-old Philippine investment laws are hampering the entry of foreign capital in the country. Economic Planning Secretary Ernesto Pernia has conceded the existing “restrictive” investment environment in the country is driving away foreign investors, who preferred more liberal regimes in the region.
The country’s economic chief planner stressed a need to pass into law more key reforms that would attract more investments, such as the Foreign Investment Act, Retail Trade Act, and Public Service Act. The Philippines, he says, can expect a triple or even quadruple increase in foreign direct investments if pending investment bills are passed into laws.
Senator Grace Poe echoed Pernia’s concerns. For one, she found a need to amend the 81-year-old Public Service Act to remedy the country’s restrictive economic environment, provide more jobs and ensure reasonable rates of services. The chairperson of the Senate committee on public services says the proposed amendments aimed to address the confusion in the definition of public utility and public services, which, for several decades, hampered economic growth.
Senator Sherwin Gatchalian agrees. The Philippines remains a relatively unattractive investment destination because Philippine investment laws were less open and generally more inhibitory compared with its neighbors in Southeast Asia.
The 1987 Philippine Constitution, meanwhile, restricts the operation of a public utility to companies whose ownership is at least 60-percent Filipino-owned. The equity restrictions apply to public utilities like telecommunications, electricity, water, and transportation.
The fears of Pernia, Poe, and Gatchalian are not unfounded. The Philippines continues to lag behind many of its peers in Southeast Asia as a result of its relatively restrictive foreign investment laws and policies. Data from the World Bank show that foreign direct investments from 2015 to 2017 stood at $23.98 billion, or way below those of Singapore, which recorded $208.48 billion. Indonesia ranked second in the region with $45.79 billion, Vietnam third with $35.5 billion, followed by Malaysia with $32.84 billion.
The incoming Congress should amend these antiquated investment laws fast. The other laggard economies in Southeast Asia are either catching up with or overtaking the Philippines as a preferred investment site.
