In spite of the country’s recent growth spurt, developments here and abroad may have put at risk an investment environment that took decades in the making. Many experts believe that the Philippines is facing uncertain times amid concerns over the sanctity of mining contracts, growing protectionism among global trade leaders, local political noise created by a firebrand president, and many more.
Trade Secretary Ramon M. Lopez and Presidential Adviser for Entrepreneurship Jose Concepcion III discussed with the Inquirer earlier this month some of the most pressing issues being faced by the trade department.
President Duterte’s economic managers said the country’s growth momentum remained, but more still needed to be done.
Here are some excerpts from the discussion.
Lopez: As the government, the keyword [we work around with] is “magbigay (give).” We have to give opportunities … the education and the training. You have to have that and the know-how.
Concepcion: To create businesses, you have to get these businessmen confident to start putting up a plant, expand their businesses.
The mining controversy
Q: What are we facing assuming Environment Secretary Gina Lopez proceeds with her cancellation and suspension orders against mining firms without due process?
Lopez: That would boil down to court cases everywhere, or an investment dispute settlement. I don’t want to think about that [since it has not happened yet].
The Mining Industry Coordinating Council (MICC) will have to disagree with that. We all want the government to be protected, not to be sued.
We are talking about contracts. Those are meant to be honored. For us in the MICC, due process should prevail.
The President’s heart is in protecting the environment, that’s why he supports Gina. [But] you have to balance being a manager and being a secretary. You have to look at all of the stakeholders.
Concepcion: I know her. She is really passionate. There is no issue about it, but sometimes your passion and your advocacy should not overlap with your work because there are other people.
On how the mining controversy may affect the respect for contracts:
Lopez: If you audit [contracts] and you see deficiencies, give [the companies] time to cure. That’s part of due process. If you’re unable to correct the [deficiencies], then you don’t deserve to operate that way, so you really have to comply.
But there’s that period to cure … You cannot just cancel a contract that has been signed. They put billions there to develop it.
Concepcion: [Finance Secretary Carlos Dominguez III, who co-chairs MICC] told me the contracts have to be respected. If there are offenses, the penalty should be commensurate to the offense. In other words, if you committed a small offense, you cannot be given a big penalty, it should be commensurate. That’s the principle he has. The government has to respect the contacts.
Lopez: Protectionism is really against the tried and tested principles of globalization already adopted by almost everyone, especially if you are the leading economy and one of the leading economies in the world. [The US has been] at the forefront of globalization.
It’s so hard to think that [the US] would be the one to backtrack.
This [protection] would worry us, but it’s not yet there. The actual policies have not yet been issued, that’s why we’re assuming a more balanced view that the protectionist policies would not be recklessly issued in the end.
Concepcion: In the last Asean-European conference, I was explaining that that is the problem when a country [fails to become] competitive anymore.
[A country is] like a corporation. If I’m so big and I pay my people the high salary, out comes a company that is small, wages are under the radar. The Philippine model is like the China model. Our wages are more affordable.
America cannot afford to pay $500 to a call center operator, because the cost structure is very high, but that is the cost of being the Superman of the world.
In the cost structure of maintaining an army and policing the world, [the expectation of] being a superpower is very high, so eventually you would lose out against countries in the Asean who are hungry for market share. We are all fighting for market share.
America is going to innovation, technology. They should continue doing that. [They should] leave the labor to countries like ourselves because they can’t beat us anymore because of our cost structure.
On local manufacturing
Lopez: Manufacturing has been revived. [It’s now] at an 8 percent growth. It used to be a 2 to 3 percent year-on-year. It’s not a zero sum game [anymore]. Even services is growing by 8 percent. All sectors are growing.
The agriculture sector was affected by a storm, so it’s minus one. But actually, it already turned positive in the last two quarters last year.
Auto excise tax
Q: The car industry wants to lower the rates. What’s your comment on this?
Lopez: If you would ask them, of course they would want lower rates. But we also have to balance.
A 2-percent net increase, to me, is not bad at all. It won’t kill the heart of the program.
Q: It’s no longer open for negotiation?
Lopez: The only difference is that the government wants a 4-percent increase, while the Chamber of Automotive Manufacturers of the Philippines (Campi) wanted 3 percent. The difference is very minimal. It should no longer derail the Comprehensive Tax Reform Program.
Q: How about the other recommendations? Like the request to expand the coverage from four tiers to seven.
Lopez: That’s already immaterial.
Concepcion: [We must look] at the overall good. The income tax would go down to 25 percent.