Private sector ‘still hesitates to invest’

DESPITE a “very liquid market” in the Philippines, the country’s socio-economic planning secretary admits that the private sector still hesitates to put their money in investments.

Speaking at the 3rd Annual Economic and Investment Forum, National Economic Development Authority (Neda) Acting Director General Arsenio Balisacan told those present that the government can only do so much to create the jobs needed to pull up the unemployed. He said it is the private sector that should be providing these much needed jobs.

He admitted that the number of special deposit accounts in banks far outweigh the number of investments that should be out to generate quality employment.

“What’s constricting the private sector from putting money in plants for manufacturing? We know it’s infrastructure,” he said. He believes that once they see this problem being addressed, the private sector investments will follow.

The country’s unemployment rate was at seven percent in 2012, while Central Visayas had a rate of 7.1 percent. Underemployment was at 20 percent while underemployment in Central Visayas was at 20.7 percent.

Wait-and-see

He said that despite very positive outlooks for the Philippines since 2010, private domestic investment did not pick up. However, he noted that by the third quarter of 2012, private investment started to grow.

His theory is that investors took a wait-and-see attitude, deciding to tuck their money away safely until they saw that government took action.

“If that happened with Filipinos, how much more non-Filipinos?” he said, referring to foreign investors who also did not invest as much in the Philippines compared to neighboring Southeast Asian countries.

“If I am correct, we will have a more robust FDIs (foreign direct investments) figure next year.”

Balisacan said the government hopes to balance out the economy’s growth by seeing investments in business process outsourcing, manufacturing and tourism, and not just relying on consumption to fuel the country’s economy.

A combined $3 billion in investments in these three industries could lead to 621,000 more jobs, with direct employment at 298,000 and indirect employment at 322,000.

Balisacan said the Aquino administration’s infrastructure and policy priorities will ensure connectivity of regions physically and economically.

To see growth led by investment and trade, he said the country needs to diversify its production and trade, ensure efficient public investment and improve the investment climate of the country.

Energy security

They want to improve revenue and tax efforts to increase their resources for infrastructure and social spending. Infrastructure development is expected to ensure an efficient flow of goods and services and mobility of the people. They also want to ensure energy security to support the country’s growth and reduce to cost of power.

He said projects totaling 310 megawatts are being planned for the entire Visayas for the years 2012 to 2016.

To generate more and better quality employment, they want to introduce policies that would simplify labor regulations and address the skills mismatch that companies have noted from new graduates.

Balisacan said that to enable a favorable business environment, they also want to encourage micro, small and medium enterprises to go along with the large enterprises.

They also hope to make industries and the workforce more competitive and push for efforts to provide a level playing field.

“The challenges are enormous, admittedly. But we did not list anything there that is unattainable,” he said.

He assured that the cabinet is reviewing restrictions in the country’s laws that may have been relevant in the past but are considered restrictive to business today. He assured they will work with Congress to amend these restrictions to reduce those that have no use to the economy.

At the same forum, Cebu Investment Promotions Center managing director Joel Mari Yu said that he has been dealing with foreign investors and noted policies that they find restrictive but cannot openly admit to. He said investors often complain to him that they find the labor laws on hiring and firing difficult, because they cannot terminate those who are unproductive without cause. They also reportedly complained about the country willingly sending out skilled workers but refusing to let skilled labor from outside practice in the country. They are also afraid they will lose out to those who bribe their way to get a favorable decision from government agencies.

Though the prospects of the Philippines seemed bright, Balisacan identified near-term global and domestic risks to the country’s growth, such as the uncertainty in Europe, the US fiscal problems, oil prices, El Niño and natural disasters, and the non-passage of urgent and priority bills.

He also cited the current issue in Sabah as a possible risk to the country’s growth, saying any negative news in an area could be construed in news reports as happening across the entire country. He said it is a problem that should be contained soon.

“If it persists far longer than necessary, we will have difficulty selling our country to investors and tourists.”