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MANILA, Philippines – Top government officials and business leaders highlighted the Philippines’ growing attraction as an investment destination at an economic briefing and investment conference held on June 26 at Goldman Sachs in New York City.
Entitled “Invest in the Philippines: Asia’s Bright Spot” the New York Conference was the second stop of a high-level trade and investment mission to the United States, from June 24 to 29, aimed at increasing American investment in the country.
“Investments in people, infrastructure and reforms have transformed the Philippines into a prime destination for foreign capital in recent years,” said Finance Secretary Cesar V. Purisima, in his keynote address.
These factors, he explained, combined with a competent, hardworking and growing workforce, and a central location in an economically dynamic region, have increased the attractiveness of the Philippines in the eyes of foreign investors, he added
“The Philippines is not perfect, nor is it completely efficient, but to investors like you, it is an opportunity. In fact, many companies are already silently making money,” he added.
Investors keen on the country
BPI Capital Corporation President Dennis Montecillo agreed with the bullish assessment, saying that there has been a noticeable shift in the demand for foreign private equity.
Montecillo, who previously worked for Morgan Stanley in Hong Kong, recounted how private equity clients have now developed a keen interest in the Philippines.
From demonstrating a very low level of interest in 2000-2007, some now designate the Philippines as one of their core markets, he said.
In addition to the Philippines acquiring investment grade in the credit ratings of S&P, Moody’s and Fitch, the country’s debt to GDP ratio is at its lowest at 45.4% in 2014, from as high as 97.7% in 1986.
Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo further substantiated the Philippines trajectory and shared that he anticipates a debt to GDP ratio of 0% within the next 10 years.
He added, however, that “there is no magic number with regards to any country’s debt to GDP ratio. The emphasis must be placed on the fiscal space and the government’s ability to spend in terms of investment and infrastructure.”
Good governance cited
Both Philippine officials and private businesses emphasized how good governance was a major driver of economic growth.
Trade and Industry Secretary Gregory L. Domingo and National Competitiveness Council Co-Chair Guillermo Luz highlighted the Philippines’ steady rise in competitiveness rankings and assured the audience that liberalization and economic reforms will continue.
Secretary Domingo enumerated some encouraging developments, including the release of the new Foreign Investment Negative List which features fewer restrictions on foreign investments; the impending amendment of the Cabotage Law that will allow foreign vessels to make calls at multiple ports; and the European Union’s granting of GSP+ status to the Philippines, which gives about 6,000 product lines duty-free access to the European market.
BPO sector
He also cited the substantial growth of the IT/BPO sector, which is expected to generate $25 billion (P1.1 trillion) in revenues in 2016 from the current $18 billion (P811 billion).
Manolito Tayag, Accenture’s Country Managing Director for the Philippines, projected that the IT/BPO sector will go up from 1 million to 1.3 million employees in 2016.
He explained that the future growth of the country’s IT/BPO sector is underpinned by its moving up the value chain, including analytics; the opening of new markets in Latin America, Europe, and even within the Philippines; identifying niche industries; locating regional and global centers in Manila; and creating a new wave of BPO cities.
Tourism infrastructure
Upgrading the country’s infrastructure is also seen as a key to boosting productivity and tourism.
Transportation and Communication Undersecretary Rene K. Limcaoco outlined the transport development plan, and explained the key performance indicators relating to reducing transport costs by about 8.5%, and logistics costs to 15%.
He highlighted the Philippines’ 653-kilometer North-South Rail as currently the largest infrastructure project in the country’s history at over $8 billion (P 360.84 billion).
The Philippine Government also actively sought investor participation in infrastructure development.
Undersecretary Cosette V. Canilao, Executive Director of the Public-Private Partnership (PPP) Center, informed the audience that 3 projects worth $4.24 billion (P191.24 billion) are being rolled out, while 6 projects amounting to $4.6 billion (P207.38 billion) are pending formal approval for roll out.
Jay Collins, Vice Chairman of Corporate and Investment Banking at Citigroup, acknowledged that the Philippines has made strides to free up fiscal space and ensure that it is infrastructure investment friendly.
He also emphasized that infrastructure risk needs to be assessed with the overall macro-environment.
Additional focus should be given on how the domestic financial institutions can help bridge gaps and provide expertise in areas such as deal structuring and contract standardization, he said.
Foreign ownership limitations
Notwithstanding the significant reforms and positive outlook, the constitutional limitations on foreign equity as well as the prohibition on foreign ownership of land continue to put off investors, said Attorney. Alex B. Cabrera, Chairman of Isla Lipana & Co.
However, he stressed that there are legal means to surmount these challenges.
One workaround he highlighted is the special economic zones, which represent a productive use of land to attract and grow foreign investments.
Bases Conversion and Development Authority Executive Vice-President Aileen Zosa referred to the success of Clark Base as a special economic zone and its high ability to host backroom and BPO operations of various companies.
She also introduced the development of the Clark Green City initiative which incorporates over 9,400 hectares of forest land for mixed-use commercial development.
Making reforms irreversible
Philippine Ambassador to the United States Jose L. Cuisia, Jr. also sought to assure investors about the future of the reforms the administration instituted.
“Looking towards the future, to the post-Aquino era, I should like to note that in order to ensure the sustainability of our good governance dividends, the Philippine Government is now focusing on a menu of crucial policy areas in the remaining months and days of the Aquino administration in order to preserve the gains of the good governance reforms that have been put in place,” he said in his speech to the audience.
In addition to the New York Conference, the delegation also held a similar conference in Washington, D.C. on June 24 and will wrap up its mission in San Francisco on June 29.
The Mission served as a follow-up to the Philippines-United States Memorandum of Cooperation on an Infrastructure Collaboration Platform, which was signed during the 8th Global Infrastructure Leadership Forum (GILF) held in New York in February.
The Conferences in the US were organized by the Philippine Embassy in Washington, D.C. and the Philippine Consulates General in New York and San Francisco, in partnership with the Center for Strategic and International Studies, the US-Philippines Society, as well as Citibank, Deutsche Bank, Development Bank of the Philippines, Goldman Sachs, HSBC, JP Morgan, Land Bank of the Philippines, Morgan Stanley, Standard Chartered, and UBS. – Rappler.com
US$1 = P45.1
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