Interview: Sylvette Tankiang
In what ways can legislative reform improve the business climate in the Philippines, stimulate competition and encourage foreign investment?
SYLVETTE TANKIANG: The Philippines can improve its business climate by promulgating laws that liberalise foreign entry into businesses and by rationalising its tax system. Barriers imposed on foreign land ownership and participation in public utilities and telecoms businesses – as well as in activities such as the exploration, development and utilisation of natural resources – must be lifted. This can be done by removing such restrictions from the constitution and authorising the legislature to enact appropriate laws that allow foreign participation. Philippines tax laws must also be amended to align the tax system with other Asian economies. The country’s corporate income tax rate is among the highest in the ASEAN bloc, and this deters foreign investors from doing business in the Philippines. In order to attract more capital and increase the global competitiveness of the country, the Tax Code must be amended to reduce the 30% corporate income tax rate.
What legislative reforms can be applied to encourage more companies to undertake infrastructure and energy projects?
TANKIANG: Philippine regulators should allow the entrance of foreign contractors to all critical infrastructure projects in the Philippines. We do not build our competitive edge in the world market by limiting competition but by learning how to be competitive. The relaxation of the rules on entry of foreign contractors will encourage competition, introduce new technologies and innovations, and drive down the costs for constructing infrastructure projects.
Legislative reform can also encourage the development of renewable energy in the country. While there is growing foreign interest in entering the domestic renewable energy market, low feed-in-tariff (FIT) rates have discouraged players from doing so. Paradoxically, the very limited FIT allocation poses a deterrent for foreign players in deciding to commit to the high investment costs associated with the construction of a renewable energy project. Renewable energy systems that require considerable investment but benefit the environment in the long run must be encouraged by the state through effective fiscal incentives.
How can the new leadership ensure the progress made by the last administration is sustained?
TANKIANG: The country’s new leadership must first acknowledge the positive elements that already exist in the Philippines and build on these. Notably, there were a number of legislative and administrative reforms introduced by the last administration, which have led to the Philippines achieving economic milestones and investment grade status. Solid fundamental policies and the steadfast development of our economy may be attributed to the stable and prudent fiscal and monetary policies of the Philippines. It is important for the current administration to continue to support the policies and initiatives that resulted in the growth of the country’s economy, despite the deteriorating economies in the rest of the world.
Furthermore, the administration of today must aggressively reduce graft and corruption in society and level the playing field in order to encourage foreign and local investments in businesses. This will expand the domestic market. In line with this, boosting public confidence by respecting the terms of government contracts will catalyse faith in conducting business with the Philippines. The country must continue to open its markets to new players and enhance the participation of private enterprises in areas of public services through public-private partnership programmes. The Philippines should also concentrate on infrastructure projects in information technology and telecoms to enable more industries, such as business process outsourcing and tourism, to develop further.
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