Investors restless over slow pace of reforms in RP

Investors restless over slow pace of reforms in RP

P. Parameswaran, Agence France-Presse, Manila

Foreigner investors in the Philippines are becoming increasingly
restless over the slow pace of reforms urgently needed to improve
the country's difficult business climate and check eroding
competitiveness.

They are concerned with infrastructure bottlenecks,
bureaucratic corruption and tax avoidance, antiquated labor
legislation, slow pace of formulating laws and insufficient
implementation, and security problems.

They are also equally worried over this Roman Catholic
country's out-of-control population growth, large budget deficit,
lack of consistency and transparency in investment policies and
decline in English proficiency, the premier competitive advantage
of Filipino workers.

President Gloria Arroyo, more than two years in power, has
been seeking to introduce reforms to increase economic growth and
attract investments but they may not be rapid enough to maintain
Philippine competitiveness in a globalized economy, foreign
business leaders say.

To reverse the trend of slowing foreign investment, the
country needs to "restore the confidence of the foreign
investment community, not with soothing words but with forceful
actions," the American Chamber of Commerce of the Philippines
(Amcham) said in an investment policy advocacy paper seen by AFP.

The report, circulated to all the top administration leaders
and heads of the public and private sectors, pointed out that
some business costs in the Philippines, especially bureaucracy,
electricity, labor and transport, are higher than regional
competitors.

The Amcham report, entitled "The Roadmap to More Foreign
Investment," said the Philippines should modernize
infrastructure, improve governance, slow population growth,
accelerate legal reform, reverse declining English standards and
improve security.

"The report contains well-known problems that are of concern
to foreign investors in the Philippines and that have been
identified repeatedly by international surveys which have shown a
gradual deterioration in Philippine competitiveness in recent
years," an Amcham official, said requesting anonymity.

The Philippines has slipped 13 steps to the 61st spot out of
80 countries covered in the latest Global Competitiveness Report
released by the World Economic Forum.

The Amcham official said the report had been welcomed as
"incisive and consistent" with goals of reformist elements in the
Philippines.

"We acknowledge the start of reforms to deal with many of the
problems and hope these reforms become deeper and be effective
and long lasting."

The official said while American investment in the Philippines
was still rising, the Amcham report "identified issues for the
Philippines as a nation to improve in order to attract even more
foreign investment capital in future years."

He said while American investors were happy with the quality
and costs of telecommunications, they were concerned about
inefficient transport and the possibility of brownouts occurring
again if power reforms were not implemented soon.

U.S. and Japanese companies are among the largest employers,
taxpayers and exporters in the Philippines.

The Japanese Chamber of Commerce and Industry's main concerns
are ill-developed infrastructure and labor and security problems.

The chamber raised the problems with Arroyo five months ago
but "we have yet to see positive policy measures permeating
through the entire bureaucracy," a depressed Japanese ambassador
Kojiro Takano told reporters last week.

"This clearly illustrates that the national government's key
policies are not properly disseminated, not correctly enforced in
the local level," he said.

Takano cited "sudden changes" in an automotive taxation system
and an "irrational" customs duty regime as examples of "lack of
coordination, consistency and rationality" in government
policies.

Problems faced by Japanese businessmen have hit tourism
earnings.

"Japan is merely four hours away from the Philippines by
plane, yet more Japanese tourists go to Thailand which is a good
seven hours away, to Singapore, or to Indonesia," he said.

But Takano's stinging comments on security -- where he
described the Philippines as dangerous and frightening -- drew an
angry response from President Arroyo, who felt they were
"exaggerated and unfair."

Arroyo said however that the government would take such
criticism "as a challenge for us to do better."

Senate President Franklin Drilon said the Japanese envoy's
comment could be "a wake-up call" for Arroyo, who has said she
would not contest in presidential elections next year.