Malaya Business Insight | November 22, 2019
The head of the Management Association of the Philippines (MAP) called on the need to lift ownership restrictions in certain sectors to encourage the entry of capital.
Speaking at the Arangkada Forum in Pasay City yesterday, MAP president Riza Mantaring said the Philippines can start by simply reducing the number of sectors in the negative list, the roster of industries where majority foreign equity is barred.
“In the over three decades since (the Constitution) was ratified, the world has moved on and globalization has changed the environment dramatically,” Mantaring said.
Mantaring said foreign equity restrictions have prevented sorely-needed investments in vital industries such as telecommunications, transport and energy.
She said restricted competition protects unproductive or poorly-performing firms at the expense of more productive ones, and reduces the incentive for firms to innovate.
According to Mantaring, limited competition in key sectors has significant consequences for the economy has led to “poor transport on logistics, and on every industry which relies on the movement of goods.”
She said trade costs could be greatly minimized by improving the country’s port and logistics infrastructure.
Lifting the restrictions, she said, will enable the Philippines catch up with its Asean neighbors when it comes to foreign investments.
Aside from foreign ownership restrictions, Mantaring cited burdensome administrative processes and labor market rigidities as affecting investment sentiment in the country.
Although the Ease of Doing Business Act is now being implemented, Mantaring cited the need to make it easier to start new businesses, get approvals and pay taxes.
“Burdensome administrative procedures not only deter new businesses from starting up and existing ones from expanding, they also encourage corruption, as do complicated tax rules and processes. They also hold back badly needed infrastructure such as new power plants, many of which are mired in the approval process despite the looming power shortage,” she said.
In explaining how labor market rigidities have made it difficult to do business in the Philippines, Mantaring related her own experience as a former private sector executive.
“I remember numerous instances when I had to explain to our corporate and regional offices overseas why we couldn’t fire an obviously incompetent employee. And worse, why we had to give him a separation package after months, or even years, of non-performance!
While we need to ensure that employees are protected from abusive employers, we also need to ensure that our laws adapt to the times. For example, rather than security of tenure, why not portability of benefits?,” Mantaring said.
To end her remarks, Mantaring stressed that one of the biggest factors which makes investing attractive in any country is predictability.
“When you are investing billions, even hundreds of millions, you need to know that the conditions under which you invested would not suddenly change,” Mantaring said.