MAPping the Future

(First of two parts)

The Philippines is on a remarkable journey toward recovery from the COVID-19 pandemic. The GDP growth rate soared to 7.6 percent in 2022, up from 5.7 percent in 2021. However, as we enter 2023, we see a slower growth rate amid headwinds, such as the global economic slowdown and the prevailing high inflation. Thankfully, the Asian Development Bank still forecasts the Philippine economy to grow by 6 percent this year, still on track with the goal of becoming an upper middle-income country.

Central to the government’s efforts in fortifying our economy is the focus on attracting investors, both foreign and local, ensuring that the Philippines becomes a thriving business and industrial hub in the region. Investments are a top priority, as they create jobs and stimulate economic activities nationwide. They are, in fact, the driver of our trade performance. In 2023, the Board of Investments (BOI) aims to secure P1.5 trillion in investments. During the first quarter of 2023, total investment projects approved by the BOI reached close to P500 billion, a staggering 155-percent surge compared with the same period in 2022.

BOI foreign investment approvals also accelerated to P165.4 billion during the same period, marking close to 4,000-percent increase. Thanks to the recent game-changing reforms, we anticipate an influx of investments that will invigorate our nation’s economic activities.

Landmark reforms

A notable policy action is the Senate’s recent ratification of the Regional Comprehensive Economic Partnership (RCEP) Agreement. For the Philippines, RCEP enhances regional trade and provides more comprehensive market access, among other benefits. We’re talking of investments here that we make sure will make our country attractive as an investment place for those who are going to export their products around us, the Philippines, so that means the Association of Southeast Asian Nations (Asean) plus the five other members of RCEP. This agreement grants our exporters access to a market of 2.3 billion people and enables Philippine manufacturers to expand into ‘Asean plus One’ countries with zero or low tariff rates.

For instance, RCEP will prove advantageous for the garments industry in the Philippines, allowing them to source fabric and textiles from 14 other countries, including China, and export their products to a more extensive market. Previously, this was not possible due to restrictive rules of origin under the Asean-Japan Comprehensive Economic Partnership and Philippine-Japan Economic Partnership Agreement. RCEP also lowers the tariff from 5 percent under the Asean-Korea Free Trade Agreement, now zero, under RCEP.

Another beneficiary of RCEP, for example, is the fish canning industry. Canning factories can source raw materials from non-RCEP parties and produce canned tuna for export to RCEP countries.

Currently, some tuna canneries source their raw materials from non-RCEP parties, such as Papua New Guinea and Norway. With RCEP, their exports to Japan will now qualify for preferential tariffs, instead of higher import tariffs under the existing bilateral agreement and the ‘Asean plus Japan’ agreement, even if some of the inputs are imported from non-RCEP countries. Many more industries stand to benefit from this agreement. We improve export potential investment first.

We are all familiar with the recent reforms, the Retail Trade Liberalization Act, Public Service Act, Foreign Investments Act and another two easing restrictions of foreign ownership of certain businesses. At the same time, the amended Foreign Investments Act also empowers MSMEs (micro, small and medium enterprises) to find potential foreign partners and investors. Moreover, the CREATE (Corporate Recovery and Tax Incentives for Enterprises) Law offers investors more attractive and rationalized incentives that can go as long as 40 years and we’ll also harmonize investments across all investment promotion agencies.

Ease of doing business

In an effort to enhance the ease of doing business in the country, the President signed executive order (EO) No. 18 in February this year, establishing Green Lanes for Strategic Investments from the initiative of the Department of Trade and Industry and BOI. This EO addresses investors’ standing back with many pain points, they say, to investors getting more traffic. This EO will address those challenges through a comprehensive, whole-of-government approach, easing barriers across multiple regulatory agencies. It introduces a single point of entry for strategic investments— highly desirable investments valued at $1 million or more. This will be done in a One-Stop Action Center at BOI. The EO streamlines the processing of permits and licenses for endorsed strategic investments by creating Green Lanes at the national government agencies and local government units.

These reforms are set to attract increased investments moving forward. We want investments that will enable the Philippines to leapfrog, that is, to quickly advance to higher-value industrialization by skipping intermediate stages of development, which we already raised relative to our neighboring countries. We are particularly interested in investments that promote advancements in science, technology and innovation (STI) and foster innovative industries. By positioning STI and digital technologies at the forefront of our country’s industrialization, our industries will be better equipped to transform and compete in the domestic and global markets. Innovation and the development of new technologies create new goods and services, stimulate the growth of industries, and expand production capacities. As a result, our enterprises will be able to generate more higher-quality and better-paying job opportunities for our people and get us closer to our dream of shared prosperity for all.

4 industrial clusters

We aim to build a dynamic industry ecosystem with the following four industrial clusters as primary sources of growth:

* Industrial, manufacturing and transport;

* Technology, media and

telecommunications;

* Health and life science; and

* Modern basic needs of a resilient

economy.

These industrial clusters will benefit from the reconfiguration of global value chains brought about by the COVID-19 pandemic, the rapid technological innovations, the growing servicification of manufacturing and the realignment of geopolitical forces.

(To be concluded)

This was lifted from the keynote speech delivered at the April 19, 2023 Department of Trade and Industry (DTI)-Board of Investments (BOI)-Management Association of the Philippines (MAP) Forum. The author is Trade Secretary and a past president of MAP.

Feedback at map@map.org.ph.