Economic Assessment Of The Rp

[Call me bubba]

an interesting read article regarding an economic assessment of the current & future of the philippines,

 

 

 

 

Last week, I had the opportunity to sit through an exclusive economic briefing for Spanish businessmen given by Señor Enrique Feás,

the economic and commercial counselor of the Spanish Embassy in Manila. Señor Feás is a highly respected economist in both the diplomatic and business circles. His briefing sought to enlighten Spanish businessmen on the opportunities and challenges in doing business in the Philippines.

 

It was the most frank assessment I had heard in years, one I also found most accurate.

 

Señor Feás began by saying that the risks of doing business in the country this year is significantly less than the last two years. The threats that loomed in 2012 and 2013, such as our unprecedented property and stock market boom, have since abated. Records show that since the end of 2012, the aggressive expansion of luxury residential projects have softened significantly, easing the risk of a property glut in the high-end segment.

As for the stock market, the price correction in the Q4 of 2013 and Q1 of 2014 also relieved the unrealistic price valuations of some listed companies.

 

For the most part, Señor Feás declares the Philippines a success story as growth and fiscal conditions are concerned. At a time when the rest of the world was smarting over the recession that followed the global financial crisis of 2009, the Philippines registered successive years of high growth. Our fiscal condition is also in the pink of health with inflation at less than four percent; external debt significantly reduced from 70 percent of GDP in the late ’90s to just 20 percent today; gross international reserves at comfortable levels, at $79 billion; current account balances at two percent of GDP; and capital formation (construction, durable equipment and inventories) on a steady ascent.

All these make for a favorable environment to do business, says Señor Feás.

It’s why we’ve seen a significant increase of Spanish investors in recent years.

 

Last March, Spanish Minister for Foreign Affairs and Cooperation Señor Jose Manuel Garcia-Margallo was in the Philippines with a delegation of 25 conglomerates seeking business opportunities.

The intent is to make the Philippines Spain’s jump-off point for Spanish companies seeking to take advantage of the ASEAN Common Market. Spanish conglomerates such as Globalvia, OHL, Sener and Abengoa were represented.

Many of these conglomerates are involved in infrastructure development. Unknown to many, 37 percent of the world’s transport infrastructure are managed by Spanish companies.  So competitive are the Spaniards in this realm that they are widely recognized for their ability to build large-scale infrastructure projects cheaper, faster, and better than the Japanese or Koreans. They are keen on participating in government’s Public Private Partnership (PPP) projects. As I write this, several alliances have already been formed with our counterpart conglomerates.

 

THE CHALLENGES

 

Having said that, Señor Feás also points out the challenges in the Philippines’ story.

One of his concerns is that the share of low cost services (e.g., call centers, tourism-related services, etc.) is growing much faster than manufacturing and exports.

As we are all too aware, a lower middle income economy

such as ours can never leapfrog from one based on agriculture to one based on high-value services without 1st having a fully developed manufacturing sector to serve as its technological foundation.

 

Hence, it puts to question whether the country will have the wherewithal to become a sophisticated economy in the next 20 years.

 

A second concern is the government’s relatively low spending on infrastructure.

In today’s logistics-driven economy, nations that aspire to rise in competitiveness must have world-class infrastructure to enable businesses to flourish. Fact is, not all these infrastructure projects can be profitable—thus, not all can be subject to the PPP scheme. Government must still fork out a substantial chunk of the national budget for infrastructure development, especially for those “missionary” in nature.

An acceptable infrastructure spend ratio is five percent of GDP—this is how much Thailand, Singapore and Hong Kong spend theirs. The Philippines ratio is less than three percent due to our low tax-generated income, which today only stands at 15 percent of GDP. In contrast, our neighbors collect taxes north of 20 percent of GDP.

 

The large disparity is due to tax evasion, which gives tax evaders no right to complain about traffic, our decrepit airports, and public facilities.

 

Señor Feás points out our position in attracting foreign direct investments (FDIs) as another liability. As we all know, FDIs provide capital, technology and the opportunities to generate jobs and increase productivity.

Sure, FDIs have increased to $3.8 billion in 2013 from $2 billion in the last 10 years,

 

but it is still a drop in the bucket compared to Vietnam, which raked in $8.3 billion;

Thailand, which got $12 billion;

and Indonesia, which amassed $18 billion.

 

We should all be aware that in the wake of the ASEAN Common Market, FDIs play an integral part in making a nation more competitive. The more goods and services a country churns out (enabled by FDIs), the more it can take advantage of the free market paradigm.

 

After Señor Feás’ briefing, a number of businessmen had two serious concerns about investing in the Philippines: the 40 percent equity cap for foreign investors and their prohibition from owning land. We must remember that big businesses who invest serious money in our shores, say north of $50 million, are in it for the long term. So Malacañang can fool itself into thinking that land ownership does not matter to the investor, but the fact remains that it is what makes investors select Vietnam or Indonesia over the Philippines.

 

It must also be said that the 40 percent  cap for foreign investors also works against our ambition of inclusive growth.

Take the recent PPP projects, for instance. The reason why infrastructure-specialists like Marubeni, Hyundai and Abengoa need to partner with a Filipino firm like Ayala Corp or the Lopez Group when bidding for a PPP project.

In which case, the input of the Filipino firm is limited to capital (which the foreigners can very well raise themselves) and perhaps knowledge of the Philippine business landscape.

 

They are, in effect, middlemen who only cause service prices to rise. Factor them out and we will have cheaper LRT fares, toll rates, water and power costs.

 

In addition,the equity cap (60/40 rule)only serves to make the conglomerates even richer and more powerful than they already are, to the detriment of the small- and medium-sized entrepreneur.

This is the reason why, despite high growth in recent years, unemployment rates have in fact increased to 7.5 percent and so has poverty. Hence, in my opinion, the need for charter change in our economic laws is pivotal for our long-term economic well-being.

 

 

http://www.mb.com.ph/a-foreign-economists-unfiltered-assessment-of-ph/

 

 

 

[the_whipster]

every decade or so there is a economic south east Asian poster boy or maybe two. In the 1980s and 1990s, it was Malaysia and Thailand. In the 000s, Vietnam. This decade it is Indonesia (which overtook the Philippines in GDP per capita a few years ago), and the Philippines.

 

the Philippines is having their day in the economic sun. Which is good news for Filipinos for sure. However one thing also for sure is that it will not last forever. There is no escaping the fact that in the past fifty years, the Philippines has fallen from being the richest of all the major south east Asian nation states, to one of the poorest, about level with Vietnam who had previously been expected to overtake it by now had not their economy tanked. Burma/Myanmar is making good steam now and look to be coming up fast.

[Thomas]

declares the Philippines a success story as growth and fiscal conditions are concerned. At a time when the rest of the world was smarting over the recession that followed the global financial crisis of 2009, the Philippines registered successive years of high growth.

Yes. RP had a drop too 2008, when the world crisis started, but in average per year RP have had much better results than the West.  (I did wrote details in an other topic a while ago.) 

exclusive economic briefing for Spanish businessmen

Spanish businessmen need opportunities extra much by the Spanish economy being not far from being as extreemly bad as the Greek.   

A second concern is the government’s relatively low spending on infrastructure.

I suppouse Spainyard can be good at SEA transports, which RP realy need, because of the huge disadvantage RP have by being spread with distances between islands.  But I doubt Spain are good at OTHER types of infrastructure, because they invented the "Manana" mentality  :)   don't bothering to finnish things in time.  And they are crap at details too. In the metal industry business, which in other countries bother about MICROmeter quality, they delivered spareparts even being so different each time, so it was clearly vissible with eye, we importers had to TEST what they suit to every time, because of the huge difference!!!... 

After Señor Feás’ briefing, a number of businessmen had two serious concerns about investing in the Philippines: the 40 percent equity cap for foreign investors and their prohibition from owning land. We must remember that big businesses who invest serious money in our shores, say north of $50 million, are in it for the long term. So Malacañang can fool itself into thinking that land ownership does not matter to the investor, but the fact remains that it is what makes investors select Vietnam or Indonesia over the Philippines. It must also be said that the 40 percent cap for foreign investors also works against our ambition of inclusive growth.

Yes. Not so interesting for foreign investors to have to pay 100 %, but only get 40 %...  :1 (103):  

(There are exceptions, but they only suit some business types.)