"Blame our performance on corruption, red tape and poor infrastructure."
Economic managers of President Duterte are mightily proud that in the past two years, the Philippines generated average foreign direct investments of $10 billion per year, or $20 billion combined for 2018 and 2017.
Yet, compared to what the Philippines’ ASEAN neighbors got as FDI in recent years, a $10-billion FDI per year seems like a pittance.
In 2017, the latest year for which comparative ASEAN data is available, FDI increased 11.6 percent to a record $137 billion from $122.8 billion in 2016 in the whole of ASEAN.
Of the $137 billion, Singapore was the top destination, with $62 billion or a hefty 45.3 percent of the total FDI. Indonesia was No. 2 with $23.1 billion or 16.9 percent; Vietnam No. 3 with $14.1 billion or 10.3 percent, and the Philippines, just No. 4, with $10 billion or 7.3 percent.
In other words, for every $100 FDI in ASEAN in 2017, Manila got a paltry $7.30. This is the share of a country that is supposed to be the fastest growing in Asia, after China, with average economic growth under Duterte of 6.5 percent per year, the highest achieved by a PH president since 1986.
If you reckon FDI among the original five ASEAN members – Singapore, Indonesia, Malaysia, Thailand, and the Philippines—PH has been last, or next-to-the-last, choice of foreign investors.
Among the ten ASEAN members today, PH was No. 6 in FDI received in 2012, No. 6 in 2013, No. 5 in 2014, No. 6 in 2015, and No. 4 in 2016 and 2017 (see accompanying chart).
The ASEAN study of FDI in 2010-2017 does not explain why the Philippines is not exactly top of mind among investors who want to park their money, long term, in the region.
To me, there are three main reasons—corruption, red tape, and poor infrastructure. It takes two hours for your workers to commute, one way, from home to their place of work. Food near the office or factory is not exactly palatable nor cheap, and it eats up a third of a day’s salary.
Investors have to grease palms to get perfunctory approvals and permits and cut through the bureaucratic labyrinth. It takes two years to five years to get all the permits—more than 150—for a real property project like a condominium.
It takes a least a month to get an ordinary business permit, a process that takes ten minutes to a day in Singapore or Canada.
You have to buy fire extinguishers from the fireman who inspects your proposed business venue. Although that is now prohibited under the Ease of Doing Business Law, will a businessman complain? The same fireman or engineer certifies anyway the fire extinguisher you buy from an outside source like Ace Hardware or True Value.
The premise of requiring of prospective business to get a fire clearance is ridiculous – it assumes that you are going to burn your place down, after you have invested so much in your business.
Ordinary mortals like job applicants have to secure, say, an NBI clearance repeatedly before they can be hired. To get a birth certificate is a whole-day effort at PSA, you standing in line for hours among the throbbing heaving mass of humanity that smells like they haven’t had a bath for a century.
To be sure, private businesses are equally guilty of vexatious red tape. The biggest advocates of red tape are the banks—your so-called friendly bank.
Under the guise of KYC – know your client (an invention of the Bangko Sentral)—banks have the habit of trying to establish, first, that you are human being, and second, that you are a decent human being.
So for a credit card or a loan application, they dig up your past and your present and try to predict your future (usually, they become pessimistic)—until you show them, you have a house and lot, a car, a stable income or business (outside of drugs), and are well-connected (banks do ask for references).
But then once you have established you have some money, you realize you don’t actually need the bank—for a credit card or a loan.