Crossroads (Towards Philippine economic and social progress)
Philippine Star, 24 July 2013


The fourth State of the Nation address of President Aquino delivered two days ago was a big let-down for me. After one hour and a half of listening, I got only a discussion of problems and details that I would expect from my town mayor, but not from my president.

Local mindset of national leadership. Perhaps, this tells us much about the frame of mind of our leadership. It equates “national” with “local.” Rather, national should underline also international aspects of national issues.

If the country is at the threshold of “investment grade,” what are the hosts of concerns and opportunities that need to be addressed? Where is the road map? Where is the leader’s vision? How do we sustain investment and make its impact inclusive? How do we multiply employment and assure poverty reduction?

Let me just talk about the investment challenges facing the nation. They are not only local. They involve getting our citizens and government to invest more. There is also need to attract foreign direct investment (FDI).

First two years of FDI inflows during Aquino’s tenure. When talking about foreign investment attraction, the proper gauge of comparison should be on a regional basis. Necessarily, comparison with ASEAN member countries is very important for two reasons:

First, from this group of countries are found some of the most impressive economies in the developing world. They represent an appropriate benchmark of performance for countries that want to do well economically.

Second, and more important, the ASEAN countries are evolving into a single economic market. As a result, tremendous volumes of FDIs are filling them. We need to prepare the Filipino nation to take full advantage of the opportunities that are opened.

As members in the same grouping, ASEAN countries have been exemplars in attracting foreign capital into their shores. Those countries that attract the most foreign capital into their shores will dominate the trade and commerce within the region.

In 2015, the free trade area – the ASEAN Economic Community – will have become fact. It is the fruit of brave and earlier steps in economic cooperation. The community will usher in more competition among the ASEAN countries. Membership in this community should be a cornerstone of our economic outlook.

We need to reset our national or domestic mindset and think regional. Our policies, our institutions, our industries, need to be competitive in relation to ASEAN neighbors. That is a step closer to being competitive on a world scale. Woe it is for the economy whose leaders think only along national lines. Its enterprises will lose out.

Foreign companies have already strategically located themselves within ASEAN for some years now. They have been making investments in countries that have welcomed them. These companies do not need to locate in the Philippines to be able to enter our market. As long as they are hosted within ASEAN, the rules of the free trade area will allow them to sell to us without tariffs as if they are located in our shores.

Those ASEAN countries with open market strategies in their investment policies will become internationally more competitive more quickly than those that hold on to their restrictive outlooks. Those countries whose regional – by “regional” I mean ASEAN-wide – policies are more accommodating will attain economies of scale faster.

FDIs to ASEAN countries compared to Aquino’s record. It is in light of the above comments that the country’s success in FDI attraction should be a major objective for the nation to aim for.

From 2010 to 2012 that President Aquino has been in office, a total of $4,399.2 billion (including the one-half year for 2010) have entered the country. This amount was slightly higher than any of the three immediate presidential predecessors in the government (when reduced to a per year basis).

The original five. The Philippines was among the original five members of ASEAN, which was founded in 1967. It is apt, therefore, to examine the performance of all these countries, including us. Philippine performance in terms of FDI flows into the country is the worst among ASEAN’s original five.

During the two years associated with President Aquino (2011 to 2012, data for 2013 not yet available), comparatives were as follows (all in US dollars) : Indonesia $39,093.8 billion; Malaysia $22,271.5 billion; Thailand $16,386.1 billion; and, almost unbelievably, Singapore, $112,573.6 billion. Considering its small population, Singapore’s inflows appear to belong to those of industrially rich countries when it comes to FDI inflows.

Translating these data relative to what the Philippines got under President Aquino for the same period, we find out how far behind we are, to wit: Indonesia brought in 9.1 times more FDIs; Malaysia, 5.2 times; Thailand, 3.8 times; and Singapore, 26.2 times.

President Fidel Ramos’s record should be compared with those of President Aquino. During his six-year term, Ramos attracted a total of $9,484.7 billion of FDIs into the Philippines, or a yearly flow of $1,580.6.

In the same period of Ramos’s presidency, the FDI inflows to ASEAN countries were relatively more modest than today’s lead that they enjoy over the Philippines. In specific terms, Indonesia then brought in only 2.2 times FDI compared to what we did; Malaysia 4 times as much; Thailand only 2.2 times; and Singapore 6.4 times.

The newcomers among ASEAN countries. Newcomers among ASEAN members have also done much better than us. Surely something is wrong with our FDI policies if this is happening right before our eyes.

During the Aquino period, Vietnam brought in a total of $15.8 billion which represents 3.7 times the amount that Aquino brought into the Philippines. It is interesting that during President Ramos’s time, Vietnam managed to exceed Philippine FDI inflows already. It was 1.2 times what Ramos succeeded to bring.

Myanmar, isolated for years, has surpassed the Philippines in FDIs compared to our country under Aquino’s presidency by attracting $4,443 billion. During the time of Ramos, Myanmar hardly brought in any FDI.

Brunei, Cambodia and Laos are three much smaller countries than the Philippines. The size of their inflows is more modest than those to the Philippines. These are countries whose populations are a smaller fraction of ours. Yet Brunei and Cambodia have brought in almost one half of the investment flows into the country in 2011 to 2012.