Management Association of the Philippines president Perry Pe reflected the general sentiment of businessmen now that it has become apparent that Davao City Mayor Rodrigo Duterte is the next president of the Philippines: “Everybody is welcoming him and the business community is expecting much from our new president especially because he is in favor of lifting the economic provisions, the restrictions in our Constitution, so that’s very welcome. And he also said he would fight criminality and leave business to businessmen. That’s fantastic.”
For sure, there are a lot of positive vibes going around at the thought that Malacañang will soon be vacated by its current occupant, and there are high hopes that the incoming government will put an end to flip-flopping, erratic business policies and will honor contracts with private partners that have invested billions of pesos, if not dollars, in big-ticket projects. According to experts, the country has failed to cash in its status as one of the region’s best-performing economies mainly because of Malacañang’s failure to truly sell it as a reliable investment destination.
No wonder investors would rather pour their money into our Southeast Asian neighbors, including Vietnam, because of so many turn-offs, among them the tendency of this government to whimsically renege on agreements and change rules midstream, plus poor public infrastructure. And did we mention the overly protective provisions of the 1987 Constitution?
Many are happy that UP economics professor Benjamin Diokno is going to be the next Budget Secretary. Diokno had correctly said that country could attract more foreign direct investments by addressing restrictive economic provisions in the Constitution and our laws, and enhancing competitiveness of the economy. According to the Estrada-era budget secretary generating FDIs is crucial because, unlike footloose capital or “hot” money, direct investments “create decent jobs and introduce into the country modern technologies which, in turn, would improve the competitiveness of the economy.”
From 2011-2015, we only managed to attract $20.4-billion FDIs— peanuts compared to Singapore’s $305.6 billion, Indonesia’s $107.6 billion, Malaysia’s $56.6 billion and Thailand’s $42 billion.
As for the much ballyhooed Public-Private Partnership program of BS Aquino, only 12 projects out of the 50 or so in the pipeline have been started in the six years that this government has been in power, no thanks to protracted delays in the review processes and the failure of government to meet contract commitments. Imagine, they didn’t have the foresight to fix right-of-way issues first for road infrastructure projects?
But a more sore point is this outgoing government’s failure to honor contractual obligations, for instance with water delivery providers and toll road operators because it is more populist to do so. This has prompted several concessionaires/contractors to file cases before arbitration tribunals abroad to seek compensation for losses or foregone revenues because of inaction by the government, which has also refused to comply with arbitral decisions—sending wrong signals to foreign and local investors who think it’s no fun doing business in the Philippines because the government does not respect the sanctity of contracts or the rule of law.
MVP Group honcho Manny Pangilinan, however, has sent a conciliatory message to the president-elect, saying the government and private sector can start over again with a clean slate and put an end to the arbitration cases. Pangilinan’s Maynilad Water Services Inc. filed an arbitration case in October 2013 before the ICC court in Singapore for a rate hike. This was granted by the ICC in a December 2014 decision—which the Metropolitan Waterworks and Sewerage System continues to ignore. In March 2015, Maynilad filed a second arbitration case seeking compensation from the government for P3.44 billion in foregone revenues—but this figure has likely risen to P7 billion.
Manila North Tollways Corp. also filed an arbitration case last April before the UN Commission on International Trade Law in Geneva to recover about P3 billion in foregone revenues, arising from the Toll Regulatory Board’s failure to grant MNTC’s proposed toll fee adjustments at the North Luzon Expressway in 2012 and 2013, as stipulated in the operation and maintenance agreement.
Much later, the Cavite Infrastructure Corp. also filed an arbitration case in New York to recover P877 million in foregone revenues, again because of TRB’s similar inaction on the contract-mandated rate-hike petitions since 2011. If these arbitration cases are not resolved, the Duterte government stands to inherit an estimated P12 billion in compensation claims, an official of the Metro Pacific Investments Corp. pointed out.
Here’s hoping the upbeat sentiment and the renewed hope and confidence felt by businessmen and investors is not misplaced, one of our buddies expressed.
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