"Just do a good job of governing."
"Just do a good job of governing."
Only a few months separated the approval by President Rodrigo Duterte of CREATE (Corporate Recovery and Tax Incentives for Enterprises Act) and the announcement that foreign direct investments (FDI) in this country decreased, on a year-on-year basis, by 33 percent during the first quarter of 2021. National Economic and Development Authority chief Karl Chua and his fellow economic managers surely did not expect the CREATE would bear FDI fruit so soon, but they—especially Mr. Chua and his colleague at the Department of Finance—clearly believe that their legislative hard work will turn the FDI situation around in quick order.
I think that they are in for a big disappointment. What happened to FDI during 2021’s first quarter and in the whole of 2021 is a harbinger of things to come—or, more accurately, to not come—in the near-term future, barring a substantial change in foreign direct investors’ perception of the quality of governance in this country.
The Philippine government can throw all manner of incentives and come-ons to foreign investment decision makers, but it is not the fiscal staff that will make their boards of directors decide, in the end, to put up a project in the Philippines, it is their perception, their judgment, of whether this country is being well-governed in short, governance. If FDI has been low in this country compared to the other ASEAN (Association of Southeast Asian Nations) countries, it has to be because foreign investment decision makers believe that overall, the investment climate in those countries is more attractive than this country’s investment climate. Vietnam, which is not a democratic country, and Thailand, where coups d’ etat are frequent, continue to top the regional FDI leaderboard.
A good example of what I wish to convey is the investment-policy situation in this country in the 1970s and early 1980s. We had a strong investments agency—the Board of Investments (BOI)—and we had a set of first-rate investment-policy administrators, but the foreign investment community were disinclined to do business with Ferdinand Marcos, whom they considered unreliable and impulsive. Thus, all the best efforts of administrators like Secretary of Finance Cesar Virata, and BOI chairman Vicente Paterno, went for naught. As the saying goes, you can bury a horse to the water’s edge, but you may not be able to make it drink.
I’ve said it many times before and I’ll say it again on this occasion. For it to perform better in the FDI area, this country’s government does not need to throw the whole store at the foreign investment community, for there are many good things going for the Philippines. Just do a good—a much better— job of governing this country.
