MANILA STANDARD: BUSINESS CLIMATE REVISITED
MANILA, JULY 6, 2012 (MANILA STANDARD) By Manila Standard Today - There must be something wrong in the investment conditions in the Philippines when big foreign companies with name brands leave and settle somewhere else. The decision of the Ford Group last week and FedEx much earlier to pull out their investments from the Philippines could be a reflection of a systemic flaw in the way authorities treat foreign companies.
Ford Group Philippines last week announced that it would close its production plant by the end of the year, citing low operational efficiency and consumer demand and the lack of a broad domestic supply base as the main reasons for the stoppage.
Local automotive parts companies were the first to set the alarm bells ringing soon after Ford decided to shut down its Laguna plant. The Motor Vehicle Parts Manufacturers Association of the Philippines warned that many of its combined 50,000 workers could be displaced once Ford stopped its Philippine operations.
Association president Ferdi Raquelsantos tasked the government to look at the reasons why Ford was closing shop. “Why are companies like them relocating their production operations to our neighboring countries like Thailand, India, China or even Vietnam?” asked Raquelsantos. “Why are some investors shying away from the Philippines? What incentives are given to them by our neighbors that we do not give? Why is our demand low? Why are our production costs and prices relatively higher?”
Raquelsantos left a poser that the first-quarter investments data can sum up. The total investment pledges approved by promotional agencies like the Board of Investments and the Philippine Economic Zone Authority in the first three months of 2012 dropped to P18.4 billion year-on-year, the lowest recorded since the second quarter of 2010, according to the National Statistical Coordination Board.
Beyond the concerns over the small market, foreign investors need lower production costs and a stable business climate to plan ahead. The Philippines offers the most expensive electricity rates in this part of the region while the government has flip-flopped on certain economic decisions, like what is happening in the mining sector.
The government has also alienated the big foreign investors like Germany’s Fraport by treating the airport controversy as a legal matter instead of an economic issue. President Aquino, as the highest official of the land, has all the powers to lure foreign investors to the Philippines. Sadly, he lacks the political will to do so.
Chief News Editor: Sol Jose Vanzi
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