Interview: Lilia de Lima

How can the Philippines make itself a more attractive destination for foreign direct investment (FDI)?

LILIA DE LIMA: The most important step that we can take as a country is to work to make the Philippines free of graft and corruption. Unfortunately, on the international stage, the image of the Philippines is that of a corrupt country, but that is all being changed under the current administration. The country is working towards transparency, good governance and an even playing field under President Benigno Aquino III’s leadership, and investors are increasingly noticing what has been done and what will be done in the years to come.

Still, many of the competitiveness reports oftentimes ignore PEZA-administered zones, whereas in reality, these zones are routinely rated among the most competitive in the region. A recent report from the Japan External Trade Organisation on investment destinations in South-east Asia rated PEZA zones as excelling in 14 of 15 categories, with the shortcoming being the difficulty of local procurement of raw materials. Further, this survey – along with others in the past – rated the Philippines among the most competitive in the region in terms of the cost of labour and real estate.

While the country has many strengths, one area that we must focus on is power, as the rates in the Philippines are not as competitive as in other countries in the region. However, the government is taking a longterm approach to its energy policy, and once the price of power is aligned with that of the region, there really is no reason that investors would not want to come here. The coming year should be promising as companies become more aware of the opportunity in the Philippines and realise that the labour and social costs are rising rapidly in other markets.

How can the Philippines distinguish itself from alternative investment destinations in the region?

DE LIMA: Incentives certainly play an important part in attracting investment to PEZA zones, but most investment destinations in the region feature comparable incentive programmes. Thus the Philippines must distinguish itself by streamlining processes and easing investment regulations. The country should especially focus on the services and support that is offered to investors. For example, many of the firms that work in PEZA zones require a quick turnaround, especially those working in the manufacturing of electronics and semiconductors. While the infrastructure in the Philippines may not be as good as it is in other countries, the country must work to mitigate the effects of this. One such strategy that has been successfully employed and should be pursued in the future is industrial clustering. The Calabarzon area has the highest concentration of automanufacturing and tech firms in the country. This lies within one to two hours transport time to the seaport at Batangas and the Manila airport.

Which industries show the most promising signs for growth, specifically within PEZA zones?

DE LIMA: From the original 16, we have expanded to 252 PEZA-administered zones. Of these, 65 are industrial manufacturing zones and 159 are IT and businessprocess outsourcing (BPO) parks, with the remaining areas catering to tourism developments and other industrial activities. While manufacturing and BPO will continue to represent the so-called bread and butter of our activities, PEZA is looking at diversifying into other areas and encouraging investments therein.

One area that shows particular promise is the agriindustrial sector, which not only offers an opportunity for diversification, but also allows for pockets of development of rural areas, including large tracts of Mindanao. The economic multiplier effects of investments in this sector will be immeasurable. Diversification will be supported by the push towards infrastructure development through public-private partnerships, including the construction or upgrading of numerous airports and seaports. By ensuring reliable connections across the archipelago, the country can lessen the effects that a lack of accessibility has on investment potential.