Yellow Pad By Karla Michelle Yu In our engagement with the private sector with regard to the second package of the comprehensive tax reform, I often hear a similar view from the businessmen: “Of course, we support the rationalization of fiscal incentives, of course we support leveling the playing field, but given our different […]
Yellow Pad By Filomeno S. Sta. Ana III As 2017 draws to a close, and even before we celebrate Christmas, the country is bracing itself for an upheaval. Consider the following major developments: 1. The Supreme Court Chief Justice Maria Lourdes Sereno is being impeached. Notwithstanding the word of President Rodrigo Duterte that he is […]
Foreign direct investment (FDI) has long been acknowledged to be one of the critical inputs to developing the Philippine economy. Recognizing the potential benefits of FDI, the Government has sought to make the investment climate more hospitable by liberalizing its investment policies. However, in spite of various measures to open up more areas to foreign participation in the last twenty years, the country still lags behind its regional neighbors in terms of FDI inflows. There has in fact been a noticeable decline in FDI inflows in the last few years.
International air transport is a critical pillar in the overall competitiveness and sustainability of the Philippine economy. The availability of an efficient network of air transport services to move goods and people is a major attraction for investments in high value production and in service-oriented facilities. International air connectivity is the major infrastructure that will harness the widely-recognized yet least appreciated strategic geographical location of the country for tourism and high value trade and logistics in the Asia-Pacific region. About 70 percent of the value of Philippine exports is moved by air. Ninety-eight percent of visitor arrivals arrived by air. The network of 8 million Overseas Filipinos including the 3.5 million Overseas Filipino Workers (OFWs) travel by air to and from their place of work. The country has an existing and extensive network of international and domestic airports and most of which remain underutilized.
To guide us in this study on legal barriers to investments, we use a basic investment framework with the perspective that institutions are the deep determinants of growth. In this regard, our framework discusses the interconnection of the Coase theorem, the credibility of commitments, the hold-up problem, and the existence of effective third-party enforcement mechanisms.
The study also adopts the approach of identifying the binding constraints on investments and proposes solutions—in the real world, second-best solutions are more effective, to these binding constraints.
This Policy Note focuses on the recent experience of the ports and shipping sectors, discusses the current state of competition and identifies the major legal and regulatory barriers that constrain foreign direct investment in the two sectors. While both sectors had episodes of liberalization, deregulation and privatization in the last two decades, shipping costs have remained high and investments inadequate due to lack of regulatory independence and weak competition. The 2010 Doing Business Survey shows that the Philippines has the highest cost of importing and exporting among its ASEAN and East Asian neighbors. Based on the competitiveness ranking of the World Economic Forum on the quality of port infrastructure, the Philippines ranked 112th out of 133 countries surveyed indicating the lack of competitiveness of Philippine ports.