MANILA, 1 October — The Philippines has no choice but to lessen its dependence on investments from the United States, its number one trade partner, and must start diversifying its investment portfolio and looking for other foreign investors. This, in essence, is the message delivered by Secretary Manuel Roxas II before members of the Makati Business Club recently. He said government agencies are now working together to reduce the cost of doing business in the Philippines.
To remain competitive in the region, the Philippines must offer highly attractive investment perks, Roxas said. He said the government is modifying the incentives structure to make the country a priority area once again for foreign investors.
While the government tries to lure foreign capital into the country, it must at the same time focus on the domestic economy especially in light of the economic slowdown in the United States and Japan, the trade secretary said. President Gloria Macapagal Arroyo, he said, wants to ensure the implementation of key infrastructure projects that could help turn the wheels of the Philippine economy. The projects mentioned include the completion of the world-class Batangas Port, the extension of the Light Rail Transit system to provinces south of Metro Manila, another train system project to the north of Metro Manila, and the Malampaya natural gas project. The government has lined up other big infrastructure projects that could help stimulate the economy in case foreign investments dry up this year. For example, the Bases Conversion Development Authority (BCDA) recently signed a 42 billion yen (about 18 billion pesos) loan agreement with the Japan Bank for International Cooperation (JBIC) to finance a road network project that would connect the Subic Bay Freeport and the Clark Special Economic Zone. Subic and Clark are two of the country’s booming industrial areas. The construction of the 89-kilometer four-lane expressway is expected to bring economic growth not only in the two industrial areas but also for the rest of Central Luzon. The road network will directly affect four provinces and three cities.
Perhaps seeing something in the country that other investors failed to see, Rolls-Royce Plc opened last week an aero repair and overhaul facility in Clark Special Economic Zone to service commercial and military customers. “This venture in the Philippines provides a focal point for special aero engine maintenance in this important growth region. We are confident that this facility will attract new business in the short term,” said Ian Lloyd, managing director, Rolls-Royce Aero Repair and Overhaul Division, during the opening ceremonies.
A Japanese car company also bucked the trend. While other foreign investors choose to wait for the investment horizon to clear, Honda Motor Co. Ltd. showed its confidence in the country by establishing a new plant. The chairman of Honda Motor recently called on President Arroyo to personally convey the good news. The carmaker will make the Philippines the center of its transmission manufacturing operations for export to countries in Asia. Honda will produce about 40,000 transmission units beginning next year.
Development projects for other areas are also in place. Despite the peace and order problems in southern Philippines, the government announced it would start shortly the rehabilitation of the Maharlika Highway in the Surigao-Agusan-Compostela Valley-Davao route. The project, which covers 424 kilometers, will cost about 8.5 billion pesos. The Japan Bank for International Cooperation will fund this project. Upon completion, the road network is expected to improve commerce and trade in the area. The government also hopes to attract tourism investments in Mindanao.
Thanks to President Arroyo’s recent state visit to Japan, these projects could be implemented despite the global economic slowdown. More assuring is the support being extended by the Nippon Export and Investment Insurance of Japan, which agreed to guarantee and act as issue manager of $500 million worth of 10-year bonds the government intends to issue next month. Monetary officials said the government decided to tap the Japanese bond market because of the prevailing uncertainty in the US market. They said the proceeds of the transaction would partly finance the national government’s budget for 2002.
As this developed, US-based investment bank JP Morgan has urged the government to proceed with its planned road show in the United States to attract investors. However, Finance Secretary Jose Isidro Camacho is cool to the idea “because the people we are supposed to meet are probably still distracted by what happened (in New York and Washington).”
