By Arra B. Francia and
Arjay L. Balinbin Reporters
MOST BUSINESS LEADERS agree that President Rodrigo R. Duterte has fared well when it comes to things that matter — continued economic growth and higher foreign direct investments (FDIs).
However, certain aspects of his leadership style have been doing more harm than good, particularly in government operations and the growth of local businesses.
Mr. Duterte is known for his strongman approach and making outrageous remarks in his rambling, often profanity-laden speeches. A study released last June by London-based economic research firm Capital Economics noted that Mr. Duterte’s “erratic and crass” behavior was raising concern among some investors.
“The President plays a critical role in establishing the ‘rules of the game,’ which affects the way the private sector conducts its business. Clear policies and regulations allow the private sector to better plan and execute its investments,” DMCI Holdings, Inc. chairman and president Isidro A. Consunji said in an e-mail interview.
“With less ambiguity and uncertainty, we can deploy our resources more efficiently, and help respond to changing social needs more effectively.”
Aboitiz Equity Ventures, Inc. (AEV) President and Chief Executive Officer Erramon I. Aboitiz emphasized the President’s hand in steering the country toward the right direction, noting that his policies will help the private sector determine investment opportunities that will further push economic growth.
Mr. Aboitiz cited the President’s “Build, Build, Build” (BBB)program, which gave companies like AEV a chance to collaborate with the government to improve the country’s infrastructure.
“Where there’s better infrastructure, the economy can grow, movement is easier, commerce can be a little bit more seamless, etc., which by itself is already a big benefit for business. But more than that, it becomes now investment opportunities for the private sector,” Mr. Aboitiz told BusinessWorld in a Dec. 21 interview.
To take advantage of the government’s infrastructure program, AEV created a new unit — Aboitiz InfraCapital, Inc. to focus on what it sees as the conglomerate’s fifth core business.
“We have foreseen that infrastructure is something that the government will be focusing on moving forward… so this is why we’ve set up Aboitiz InfraCapital to be able to focus in these areas and support the nation building program of President Duterte,” Mr. Aboitiz said.
Aboitiz InfraCapital received original proponent status (OPS) for the operation, maintenance and expansion of the New Bohol (Panglao) International Airport. It is also part of the consortium seeking to rehabilitate the Ninoy Aquino International Airport (NAIA), together with AC Infrastructure Holdings Corp.; Alliance Global Group, Inc.; Asia’s Emerging Dragon Corp.; Filinvest Development Corp.; JG Summit Holdings, Inc. and Metro Pacific Investments Corp.
PERCEPTION OF DOING BUSINESS
For Employers Confederation of the Philippines (ECoP) acting president Sergio R. Ortiz-Luis, Jr., Mr. Duterte has so far done well on important economic measures.
“Where it counts, I think the President is doing well. GDP (gross domestic product) is a good measure, increase in foreign direct investments and in spite of the fact that there’s a lot of criticism about our foreign relations with other countries, but we’re doing better than before,” Mr. Ortiz-Luis said in a phone interview.
The Philippines remains a growth leader in the Asia-Pacific region, despite economic expansion slowing to 6.3% in the first nine months of 2018, missing the government’s target of 6.5-6.9% last year. Accelerating inflation was blamed for the slower growth as higher prices served to discourage household spending, a key factor in driving GDP growth.
Even then, a study by S&P Global Ratings expects the local economy to pick up to 6.4% this year from its 6.2% forecast for 2018 due to election spending and strong domestic demand.
Meanwhile, FDI net inflows stood at $8.038 billion during the first nine months of 2018, 24.2% higher than the $6.472 billion in net inflows posted in the same period a year ago. This was seen as an indicator that foreign investors remained upbeat on the Philippines’ growth, despite criticism against the President’s war on drugs and the toll from extrajudicial killings.
Apart from the positive measures of growth during Mr. Duterte’s midterm, Mr. Ortiz-Luis said the President could have done better in appointing more competent people into his Cabinet.
“Unfortunately we also see that the universe of selection is very limited…. People in the military, people he knew in school, so medyo limited ‘yun (that’s quite limited). I have nothing against him, but the people from the military don’t really have the experience, and that can also be hazardous to the economy,” the business leader said.
Mr. Duterte has appointed several military men to his Cabinet, including Environment Secretary Roy A. Cimatu, acting Information and Communications Secretary Eliseo M. Rio, Jr. and Social Welfare and Development Secretary Rolando Bautista.
For the Bureau of Customs post, Mr. Duterte initially appointed former soldier Nicanor E. Faeldon, who was then replaced by former police officer Isidro S. Lapeña. The current Customs chief is former Armed Forces chief Rey Leonardo B. Guerrero.
“If he can find other competent people, I think the progress would be better. Like sa Customs natin, wala pang masyadong maliwanag na direksyon (Like in Customs, there’s no clear direction). And in agriculture, I think there are some people who would have been more competent. Kita naman ‘yung nangyari sa rice (We have seen what happened with regards to rice [supply]),” Mr. Ortiz-Luis said.
Also sought for comment, president George T. Barcelon of the Philippine Chamber of Commerce, Inc. (PCCI) said in a phone interview on Nov. 16, “He (Mr. Duterte) wants to fast-track a lot of things. But there is a limited number of managerial talents that he can rely on.”
“Yes, he relies on the military, and he is comfortable with them. There’s nothing wrong with that. On our side, we just look forward — that many of these military men are disciplined and that they follow orders. But like in any endeavor, for them to fast-track things may not (turn out) that fast. We hope that the private sector would be consulted in lieu with this Bureau of Customs, all of these things,” he added.
Mr. Barcelon said there must be an order from the President “as to the timeline of accomplishment goals of each agency, so that he can measure its success or behaviors.”
“Each agency can have its targets, like for the DTI (Department of Trade and Industry), it can have its targets on how (much) more percent(age) of foreign direct investments we can get, and of course targeting what country, what sectors,” Mr. Barcelon said.
Mr. Ortiz-Luis cited the President’s tough stance against corruption has helped improve bureaucracy.
“The perception of doing business in the Philippines has become more legitimate. Hindi pwede ang ayusan. Malaking bagay ‘yun. (No fixing allowed. That’s a big [improvement].) Now, even those na malakas (who are influential) have to follow the procedure,” Mr. Ortiz-Luis said.
Mr. Aboitiz called the President’s leadership “refreshing,” saying this helped the government push through with much needed reforms, such as the rehabilitation of top tourist destination Boracay from April to October 2018.
“This ‘action’ style of the President is really something that for me is refreshing rather than people talking, saying they are worried about certain effects and what people will say, it’s action right away. To my mind, it’s effective,” Mr. Aboitiz said.
OTHER AREAS OF GROWTH
Federation of Philippine Industries Chairman Jesus L. Arranza emphasized the need to address the perceived extra-judicial killings in the country so as not to scare off potential investors.
“Who the perpetrators of these (crimes) are should be looked into by the police seriously because it might affect the influx of investors in the country, for who would like to come to the Philippines, establish a business, and only to be killed after,” Mr. Arranza said in a phone interview.
In November, United Auctioneers, Inc. CEO and Foton Philippines Chairman Dominic L. Sytin was shot dead in front of a hotel in Subic.
Mr. Arranza also said there is much to be done in improving ease of doing business in the country.
“In the ease of doing business, kulang pa (it’s still lacking). There is much duplication even in the seeking of business permit, construction permit. Because you have to pass from the homeowners’ association, to the barangay, and to the municipality, and to whatever place. It’s too cumbersome,” he explained.
For the remaining term of Mr. Duterte, DMCI’s Mr. Consunji said the government should consider the implementation of policies that would “facilitate and incentivize the entry of better technologies and private sector investments in the agriculture sector.”
“The contribution of the agriculture sector to the local economy has been gradually declining over the years. Our farmers need help in making their operations more efficient, competitive and sustainable,” Mr. Consunji said.
The head of the listed engineering conglomerate also recommended that the government consider pursuing joint ventures with the private sector to develop idle land assets.
“This way, they unlock the value of the properties and create structures that could benefit government employees, military personnel and law enforcement officers. We did something similar with Bonifacio Heights, the first condominium off-base housing project of the Armed Forces of the Philippines,” Mr. Consunji said.
Meanwhile, Mr. Aboitiz held out hope that the president will be able to restore peace in Mindanao through the implementation of the Bangsamoro Organic Law, which is currently scrutinized by government officials and the Moro Islamic Liberation Front.
“That’s why he’s pushed the Bangsamoro Law and I think the implementation in that is very crucial. When he was elected president I said from the beginning, if there’s one president who could bring peace to Mindanao, it’s President Duterte,” Mr. Aboitiz said.
The rest of the policies would have to be the continuation of infrastructure projects, as well as additional investments on education. For Mr. Aboitiz, the government focusing on these two aspects will help businesses improve their services in the long run.
“If government focuses on infrastructure and possibly education, they don’t have to worry about everything else. Let private sector worry about everything else. And things are going to work out very, very well.”
Also sought for comment, John D. Forbes, senior adviser of the American Chamber of Commerce of the Philippines, Inc. (AmCham), said his organization is “concerned that the country is slipping in several global competitive rankings,” and calls on the administration to “increase its efforts to return to the upward momentum in these rankings that was taking place previously.”
“Perhaps the decision to disband the National Competitiveness Council, which President Macapagal-Arroyo initiated in 2007, could be reconsidered,” Mr. Forbes said in an e-mail on Nov. 22 in reply to questions. “We would appreciate learning more about how the administration plans to raise the rankings in these global indices.”
“The new director-general for the Anti-Red Tape Authority, when appointed, should move quickly to implement the new Ease of Doing Business Act, the rapid implementation of which can raise the country’s ranking in the World Bank Doing Business rating.”
On infrastructure, Mr. Forbes suggested that “solicited PPPs (Public-Private Partnership projects) have a place in the menu of different models for PPPs, along with unsolicited and hybrid.”
Then there are ROW (right of way) issues which are “slowing the start and completion of several projects,” and this needs to be addressed.
Mr. Forbes said his group “believes the private sector, with proper oversight from government regulatory agencies (CAAP or an eventual Philippine Airport Authority) can manage airports more efficiently than the government.”
AmCham “looks forward to the successful privatization” of the Ninoy Aquino International Airport (NAIA), as well as the Clark, Davao, Panglao, and other airports, Mr. Forbes said.
He also cited delays in approvals by the Energy Regulatory Commission (ERC) of new generation facilities.
“More plants need to commence construction in 2019 to avoid brownouts in Luzon in 2022 and 2023. Construction of the interconnection of the Mindanao grid to the rest of the country, which has recently started, has long been needed and was recommended in Arangkada in 2010,” Mr. Forbes said.
On the other hand, “the example of the government’s firmness in the Boracay cleanup should cascade across the country,” Mr. Forbes said. This is one takeoff point for the government to set a direction in the remainder of Mr. Duterte’s term.
European Chamber of Commerce of the Philippines (ECCP) president Guenter Taus, in a phone interview on Nov. 19, said the “President is certainly choosing to get a handle on criminality to a certain extent.”
But he also pointed out, “We do find it increasingly more difficult to sell the Philippines in Europe because we create a lot of uncertainties (with)… the current policies….”
He attributed this sentiment “to a number of (Mr. Duterte’s) rhetoric like, ‘We don’t need Europe. We don’t need this. We don’t need that.’ So, that certainly leaves us with uncertainties.”
“Are we now entitled to incentives? Are incentives being withdrawn? Or what are you looking at?…”
With regards to BBB projects, “I don’t think it is doable,” Mr. Taus said. “For the last three years, we haven’t seen much of the progress in the speed that it’s supposed to be. So certainly, they will not be able to finish that in the next three years. Therefore, it remains to be seen what happens in the next administration whether they will continue this program or not.”
He added: “If all of these “Build, Build, Build” projects would materialize, certainly we will run out of our capacity because, again, up to this point in time, we are still pushing for the liberalization of the construction industry. Still, it hasn’t happened, even though we have been working on this for the last six years. Despite all the assurances, still it hasn’t happened.”
In a phone interview on Nov. 17, British Chamber of Commerce Philippines (BCCP) chairman Chris Nelson said, “We want to see the Foreign Investment Negative List even more relaxed.” He also looks forward to the “promulgation of the implementing rules” on such recent legislation as the Ease of Doing Business and Efficient Government Service Delivery Act or Republic Act No. 11032.
“We understand the challenges, but we want to see the quicker implementation of these projects,” he also said, referring to Mr. Duterte’s “Build, Build, Build” infrastructure program.