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No trickle-down effect
While the economy has soared during President Aquino’s first three years—the stock market has zoomed to historic highs, the peso has become robust, and the country has achieved investment grade status (from Fitch Ratings and Standard & Poor’s)—this has not translated into an increase in employment opportunities and reduction in poverty.
Portfolio investments, or hot money, have surged, but FDI has remained abysmal at $1.5 billion this year, 50 percent down from its 2007 level.
Last year, the Joint Foreign Chambers of the Philippines issued a statement lobbying the government to shorten the foreign negative list in its next biannual listing in 2014.
“Despite continuous advocacy over almost a decade, responsible public sector leaders have yet to assign priority to shortening the list, with the exception of the economic provisions of the Constitution.
“Amending these constitutional restrictions has been advocated by congressional leaders and a study was reportedly prepared at the request of President Aquino but not publicly released. However, little attention has been paid to removing other restrictions from the list,” the foreign chambers said.
Overdue
The chambers said a review was overdue. “This could be done by an interagency team instructed to review various restrictions on foreign equity investment … taking into consideration whether restrictions impede investment, job creation and competitiveness. A report with specific proposed amendments could be ready by the time the 16th Congress is convened,” they added.
They pointed out that since the FIA was enacted in 1991, there had been only two major changes made: the Retail Trade Liberalization Act (2000), which opened retail trade to foreign investors bringing in at least $2.5 million; and Executive Order No. 158 issued in 2010, which allowed 100-percent foreign equity in gambling in economic zones (by presidential proclamation).
The foreign chambers noted the Philippines’ miniscule 3-percent share of net FDI inflows into Southeast Asian region last year.
“While many factors explain this situation and there is good reason to expect the amounts to rise in 2013 and thereafter, a negative list that is too negative is one of the factors effecting FDI that can be further liberalized,” they said.
Foreign investments in the country are limited to zero percent in media; 40 percent in mining, oil and gas, agriculture and forestry, telecommunications and transportation; 60 percent in banking; 65 percent in power; and 75 percent in light manufacturing.
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