How to Achieve Optimum Investment Enterprise Development

 

Provide an Enabling Environment for Business. There is wide consensus that in order for the Philippines to attain optimum investment enterprise development, government must provide an “enabling environment” for businesses to grow. But how to achieve this “enabling environment” has been the subject of much debate and controversy not only in government circles but in academia as well. Various administrations from Cory Aquino to Gloria Arroyo have grappled with this question and have adopted various strategies towards this end, but despite best efforts the Philippines has still consistently lagged behind its Asian neighbors in terms of attracting foreign investors and achieving economic development. For his part, President Noynoy Aquino recently bared his two-pronged strategy to achieve this goal: 1.) by “leveling the playing field” and 2.) by “lowering the cost of doing business” in the Philippines. So far, this policy pronouncement has been translated into specific programs by his Cabinet officials, among the more notable of which are the BPLS Streamlining program of DILG-DTI, RATS and RATE program of DOF, and the various infrastructure development programs of DOTC and DPWH. The President has also demonstrated his resolve by signing E.O. 44 expanding the National Competitiveness Council and by adopting a “no-nonsense attitude” towards corruption, pursuant to his "Kung Walang Corrupt, Walang Mahirap" battlecry. 

“Kung Walang Mayaman, Walang Mahirap.” After only two years in power, it may still be too early to judge the Aquino government. The most that can be said for now is that President Aquino has yet to live up to the people’s high expectations. With the recent SWS Survey showing the number of Filipinos who rated themselves poor (“mahirap”) increasing by 2 million, it is becoming increasingly clear that PNoy’s “Kung Walang Corrupt, Walang Mahirap” slogan may not be enough to attract foreign investors and enable the country to achieve “inclusive growth.” To paraphrase Noam Chomsky, the ills of our society may not solely lie in a corrupt government but in a system wherein “costs and risks are socialized to the extent possible, while profit is privatized.” Thus, more than just curbing corruption, Aquino must also address the skewed system where political and economic power are concentrated in the hands of a well-born few. Which brings me to the last two points of my essay. 

Discard Protectionist Policies. First, we cannot continue on ignoring the 5,000-pound gorilla in the room. We must confront the inconvenient truth that the Philippines can never become globally competitive until we discard our protectionist policies. We must face the fact that there can never be a “level playing field” unless we amend the “nationalist” provisions in the Constitution. Even if we succeed in lowering our electricity rates, reduce the time it takes to register a new business, eradicate corruption and improve transparency, upgrade our labor skills, etc. most foreign capitalists will still see us as an unattractive investment destination simply because of the perception that one cannot do business in the Philippines without partnering with the native oligarchy (case in point: Fraport). This may not bother some businessmen, but for majority of foreigners it serves as a powerful disincentive and a major turn-off.  

Improve MSME Access to Credit. As a final thought, I would like to say that (as someone who once worked for SB Corp.) I am a firm believer in the power of micro-lending as a means to “inclusive growth.” Whereas government dole-outs (i.e. CCT Program) and education reform (i.e. K+12) are long-term strategies towards inclusive growth, improving MSME access to credit is a more direct policy solution that brings about immediate results notably in terms of jobs creation and income generation for those who need it most, the ”unemployable” poor. Thus, the Aquino government must also focus its efforts towards improving MSME access to credit by 1.) infusing more funds into SB Corp. and other public lending institutions (i.e. LBP, DBP, Quedancor, PCIC, etc.) and 2.) ensuring industry compliance to the 10% mandatory lending provision of RA 9501 (Magna Carta for MSMEs). At present, SB Corp.’s total loan portfolio (TLP) does not even represent 1% of the ₱3.5 trillion TLP of the entire Philippine banking system. To become an influential “player” SB Corp. must increase its market share. But more importantly, the continued financial success of SB Corp. serves as indubitable proof that (contrary to conventional wisdom) “there is money in MSME lending.” This should serve to encourage more private banking institutions to engage in MSME credit lending.