If the Duterte administration’s 10-point Economic Plan was the road map, then we now have the beginnings of a road.
The Department of Trade and Industry and Board of Investments (BoI) have just unveiled their new Investment Priorities Plan (IPP) for the next 3 years.
This evolving granularity carries that germ of a campaign promise: to make growth more inclusive, by reflecting the ambitious poverty reduction target from 21% to 16% on the back of a robust GDP growth projection of 7%-8% from 2018-2022.
The road is looking more like an arterial network stretching away from the clutches of Imperial Manila and larger corporates.
The 2017-2019 IPP, in its own preamble, will be “accessible to all Filipinos, particularly those who remain poor.” You have here a more inclusive business model, and a deliberate focus outside Manila. In parallel contrast, the PPP projects under the Aquino administration showed 80% of them in the megalopolis.
At work are centrifugal forces of decentralized, rural growth, SME development cast across a litany of key sectors, and a few do stand out:
- Strategic Services, which include integrated circuit design, higher value IT-BPM, avionics, E-vehicles, waste treatment, Advanced EPC (engineering, procurement, construction), and as a call for better and broader telecoms — incentives for new players alone;
- Infrastructure and Logistics, decentralized to promote Public-Private Partnership agreements at the local government unit (LGU) level;
- Health Care, including a welcome focus on promoting drug rehabilitation centers (more in the next column);
- Mass Housing, which specifically mandates a reduced cost of P2 million (down from the P3-million threshold; inflation be damned); and, as if investors haven’t gotten it by now:
- SME and Rural Development, and save for modernization/upgrades of existing facilities, BoI registration and incentives will only be given to “projects located outside Metro Manila.”
Case in point: Even the sacrosanct BPO Sector isn’t getting kid gloves here, with the latest draft envisioning contact centers and non-voice business processing activities located in Metro Manila losing their investment perks by 2020.
While majority of existing BPO locators are registered in another entity, one may assume that the new PEZA Director General, herself a proud Mindanawon, may fall in line to make that message clear.
Overall, and per the BoI, the overriding criteria for making the cut will be: 1) employment generation, 2) investment and 3) technology transfer.
This reflects, as a Cambridge professor once posited, the potency of Structured Agency, roughly translated by an unworthy postgrad as: a platform where interactive change can happen in an optimal, far-reaching way. Indeed, channeling investments is like directing a water hose and sprinkler to which flower bed you want to nurture. Or, on a more relatable level, choosing from the supposedly hip, familiar friends that eventually hold you back, or spending time with underrated introverts that — to paraphrase a jiujitsu coach, are good for you, good to you, or good for your growth.
That, the Cabinet’s economic cluster and technocrats have done arguably well. Beyond the IPP, we see a more progressive set of tax reforms reflecting greater social justice; unheralded but potent sectors like agriculture and manufacturing getting a much-needed vitamin shot; and, foundational issues like responsible parenthood given some spine while keeping conscience clauses intact.
Well and good. But before we take a swig of the Kool-Aid, let’s look at the unpaved part of the pathway.
One of those technocrats, Socioeconomic Planning Secretary Ernesto Pernia, came over to the studio this week. He stood pat on NEDA’s stance that total investment levels need to rise to 30% of GDP, higher than the already ambitious 24% target for 2022, before the country can be welcomed into the fold of advanced economies where incomes sustain living standards and where poverty fades to a minor ailment versus the pandemic it’s been in the Philippines for too long.
However, the bulk of that ammunition is expected to come from the private sector, even with unprecedented government spending.
Currently, 80% of private investment is from domestic sources. While net FDI inflows are on track to hit the central bank’s $6.7-billion forecast for the year, it shrank 59% in October, the 2nd straight month of decline. Not to mention that the year-end figure will get its biggest boost — about a third of the final projection — from commitments in April — during the Aquino administration, and right before the dust settled on the eventual winner. Despite the noise, there is some momentum that can be built on: the Economist Corporate Network’s latest Business Outlook shows 39% of international executives said they would still increase investment in the Philippines, vs. four percent who plan to retreat. Not too shabby, but still nothing to write home about given the external risks on both sides of the pond.
Pernia, who already rocked the boat with his carry-over push from academic to policy maker for his push for comprehensive reproductive health services, went at it again. The NEDA Director General advocated in no uncertain terms, the liberalization of key economic sectors to level the playing field and maximize long-term growth.
That puts the onus on Congress not to be ham-handed on Constitutional reform — lest the more prosaic economic provisions get overwhelmed in the lust for political restructuring and federalism (subject for another column).
BoI Managing Director Ceferino Rodolfo, expects 2017 investment levels to eclipse last year’s by 13% to breach the P500-billion mark, the highest in this century.
But why stop there?
Going back to the clumsy postgrad student, his dissertation does have some redeeming factors and can be downloaded below: http://cambridge.academia.edu/QuintinVPastrana
This columnist argues it is the next best thing to a prescription pill for insomnia and this new age of anxiety.
In all seriousness, here are three key findings, both conceptually, and empirically from countries that resemble us most economically and culturally:
• While one can argue that money regardless of source is still money, foreign investment is critical not just in terms of volume but potency: FDI to bring the advantages of tech transfer, global supply chain linkages, and competition to drive growth, innovation, and inclusive development.
• And, as a prelude to this columnist’s next installment, a quote used during its defense and subsequent industry presentations: “The essence of tyranny is not iron law. It is capricious law.” (Christopher Hitchens). Having worked for a Fortune 100 global corporation, a senator who helped ratify the country’s entry into the WTO and liberalize its banking sector; and helped a Trade secretary during a congressional stint to craft investment reforms in energy and technology, one common thing stands out. Investors do not need you to bend over backward ’till you bend yourself out of shape. They do not need for you, to use the old vernacular image: to give up even your grandmother’s urinola (bedpan) to make them come, spend, and stay.
• Securing and sustaining investment, as the data and real life investment treaty, dispute, and sustainability experiences globally have shown, is about being consistent, predictable, providing fair recourse when disputes occur as they usually do. You don’t liberalize everything to the hilt while providing nothing by way of enhancing competitiveness when a more level playing field finally sees worthy counterparts for oligarchs, monopolies, duopolies, or protected interests.
You do, as the Toltecs profess, the following: be impeccable with your word. Don’t assume. Never take anything personally. Always do your best.
It’s a good code for investment promotion, institution, or individual: a tried and tested way to engage, and to live well — which is the end game these policies aim for to begin with.
I’m sure we’ll find a local counterpart to make things stick. For now, with the IPP, we have something that is less catchy, more wonky, but can make a difference. And with it, the chance to buckle down to live good governance, cut the diatribes, detours, death squads, and devious plots — and galvanize the country towards inclusive development for all.
Quintin V. Pastrana is an anchor and associate producer at Bloomberg TV Philippines
