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Wednesday, April 05, 2006
Politics, mediocre infra cause RP to fall behind
MANILA - Political instability, high taxes and mediocre infrastructure have left the Philippines lagging far behind its Southeast Asian neighbors, the local Japanese chamber of industry said yesterday.
A study commissioned by the chamber on the investment environment in Thailand and the Philippines noted that Manila was a “leading economic power of Southeast Asia” in the 1970s before being dramatically overtaken by Bangkok over the past 30 years.
Ahead
“Those managing Japanese corporations in both countries voiced their general evaluation that Thailand is solidly ahead of the Philippines. Political stability and secure peace and order situation are vitally important and integral part of an overall evaluation whether a country is investor-friendly or not,” the study concluded.
“We have seen in the Philippines that political instability has been a major obstacle in implementing consistent industrial development policy over a long period of time. This has been particularly true in the development of local supporting industries, which are very important for foreign direct investment in the manufacturing sector,” it said.
The survey was released amid political troubles faced by both Thai Prime Minister Thaksin Shina-watra and the Philippine President Arroyo.
Arroyo survived an impeachment vote in Congress in September over opposition allegations that she stole the May 2004 elections.
But she remains massively unpopular, threatening her economic reform agenda as well as her efforts to amend the Constitution to make the Philippines more investor-friendly.
Aside from law and order and political bickering, the Japanese Chamber of Commerce and Industry of the Philippines urged Manila to attend to specific issues on labor, investment incentives, the tax system and infrastructure.
Labor
Labor costs in the Philippines were “equally competitive with that of Thailand” and Filipino workers have a “clear and apparent edge over Thai workers” in English-language proficiency, the study said.
But it complained about a minimum wage that is “prone to increase every year,” the “presence of radical unionism” and Arroyo’s tendency to abruptly declare public holidays, disrupting factory work.
The study also cited Philippine constitutional constraints on foreign ownership of land and foreign equity participation.
While Manila was successful in attracting foreign investment in export-oriented industries, unlike Bangkok it “has not been successful in developing a sustainable domestic industrial policy.”
It said the Philippines’ corporate tax of 35 percent was the highest in Southeast Asia, putting it “at risk of being considered an ‘investor-unfriendly’ country.”
Whip
Thailand was much ahead of the Philippines in almost all areas of infrastructure, and Manila should concentrate on the development of the main logistic corridor in the provinces around the capital, it said.
Manila should crack the whip and take over private infrastructure projects when they fall behind schedule, and ensure that state-funded projects have sufficient funding, it added.
But in a statement, Arroyo said the Philippines is now more stable and in a growth cycle, more than a month after she briefly assumed emergency powers to quash an alleged military coup attempt.
She cited the return to profitability of the chronically loss-making state utility National Power Corp., pledges of higher US development aid and increased investment flows.
The United States announced increased annual development aid to Manila of $131.2 million dollars and signaled its support of Arroyo’s efforts to sign a political settlement this year with Muslim separatists waging a decades-old insurgency. (AFP)
For Bisaya stories from Cebu. Click here. (April 5, 2006 issue)
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