Insight: The booming Philippines' missing link - foreigner investors

Tue Dec 18, 2012 7:35pm EST
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By Rosemarie Francisco and Stuart Grudgings

MANILA (Reuters) - The gathering had the air of a post-mortem. About 100 executives and government officials listened quietly as Guillermo Luz poked holes in the Philippines' fairytale economic revival.

Luz, head of the Philippines' National Competitiveness Council, projected a deck of slides onto two pull-down screens that showed the fast-growing Philippine economy slipping in the World's Bank's "Ease of Doing Business" index to 138 out of 185 countries, near Tajikistan and Sudan.

"It's a lousy neighborhood," he said of the two-notch fall this year. "I do not want to live with that ranking."

As the Philippines gallops ahead with the strongest economic growth in Southeast Asia and one of the world's best-performing stock markets, its shortcomings are being laid bare, including stubborn problems that have already started to undermine its economic renaissance.

While foreign funds have poured into Philippine assets this year, driving the main stock index .PSI up around 30 percent to a succession of record highs and lifting the peso currency about 7 percent, foreign direct investment (FDI) remains embarrassingly low.

Total FDI is on course to hit around $1.5 billion this year -- about half its level in 2007 and less than the average $1.7 billion received every month in remittances from Filipinos overseas.

That is only about 3 percent of the total that flowed last year to a group of five peer economies including the Philippines in the 10-member Association of Southeast Asian Nations (ASEAN).

In his presentation in Manila's Makati business district, Luz highlighted the Philippines' lowly ranking in a range of categories, from "paying taxes" (143rd), to "starting a business" (161st) and "resolving insolvency" (165th).   Continued...

Employees walk out of a manufacturing company that assembles wiring harnesses, automobile instruments, battery cables and other automotive parts, after their shift in Calamba City, south of Manila December 14, 2012. Picture taken December 14, 2012. REUTERS/Cheryl Ravelo