Interview: Roberto de Ocampo
What reforms need to be enacted to generate a more investment-friendly legal framework?
ROBERTO DE OCAMPO: The concept of inclusive growth seems to elude the Philippines time and time again. This is not the first time we have had a growing economy, but we have not reached the stage where it translates into opportunities for the majority of the population and we observe a rising middle class. What is occurring thus far is the emergence of a new possibility to increase employment by translating the growing interest in the Philippines as an investment destination into actual investments. To ensure this process, we cannot rest on our laurels, and the credit rating upgrades should not be seen as the end objective but only the beginning. Looking at competitiveness reports, our number-one concern continues to be inadequate infrastructure, particularly the international airport. The reason this should be highlighted is because it is the first impression for investors coming into this country. Port facilities also need to be prioritised, particularly in rural areas. Recent focus has centred around the cabotage law, hoping it will allow foreign ships to do business in the Philippines and move larger ships with larger quantities of goods as a way to lower current shipping prices. However, changing the structure of inter-island shipping by itself will not do the trick if the ports remain small and cannot accommodate the larger ships.
Concern number two is bureaucracy. Whereas it takes only a day to start a business in Singapore, in the Philippines it can take months to years, which is not a good way to attract businesses. A third concern is constitutional amendments to ease the entry of foreign investments as too many barriers exist in respect to what businesses foreign entities can get into, as well as ownership limitations. The proposed Fair Competition Law presents an institutional change that could address these barriers. The basic premise of a democratic capitalist system is competition or else the system would lack the vibrancy that one would expect for economic benefits to filter down to a wider part of the population.
What is your view on the right mix of services, manufacturing and agribusiness of the economy?
DE OCAMPO: As a result of the impending ASEAN economic integration, we have to capitalise on our competitive niches. Some clear winners include the business process outsourcing industry, while others such as tourism could improve. The growth potential of tourism will depend on infrastructure, primarily on airport facilities. To accelerate development of agriculture would require a review of the agrarian reform law and its implementation. As long as we think along the lines of ownership and not so much productivity, agrarian reform is an obstacle to using the agricultural sector as a major competitive advantage. Distribution of land titles without providing any to boost productivity for low-income communities and farmers would not benefit the sector unless the approach integrates farmers into a larger aggrupation that will be a more sensible basis for financing and eventual agro-industry.
In order to generate a manufacturing base that can spread to other parts of the country, we need to have significant magnets, which is where Subic and Clark would play an important role. The land area of Subic is bigger than Singapore, whereas Clark is the obvious location for the international airport. One can talk about smaller clusters of manufacturing arising in different parts of the country; however, in the final analysis, manufacturing will not just disperse. The willingness of Japan to geographically diversify its investments after the floods in Thailand does not translate into several small plants across the Philippines. We must focus on attracting these investments into Subic and Clark due to the infrastructure in place and the proximity to a skilled workforce. Beyond those, we have Cebu and in Mindanao there is Cagayan de Oro and Davao City, which we can develop as magnets with multiplier effects that can eventually generate their own supply chains and benefit surrounding small enterprises. That is the strategy to be employed in order to develop the core pillars of a thriving domestic manufacturing sector.
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