OBG talks to Gregory Domingo, Secretary, Department of Trade and Industry (DTI)

Interview: Gregory Domingo

In what ways are the Philippines working to boost its visibility as an attractive destination for foreign direct investment (FDI)?

GREGORY DOMINGO: When it comes to investments, there are two components: investments by domestic companies and investments by foreign firms. In both cases, we have seen growth in registered investments. For example, looking at registered inflows to the Philippine Economic Zone Authority (PEZA), nearly 100% of them push through whereas, on the Board of Investment side, about 80% push through. Looking at FDI, the numbers have increased over 30% in 2013, while registered investments have also risen up to 30% year-to-date. If one looks at the economic zones (ecozones), particularly those under PEZA in the Calabarzon region, one sees that nearly all of the zones have been taken up.

Another trend has been the growth in domestic investment. For example, in the power business, nearly all the current power projects are being financed locally whereas in the past they were foreign-funded. The best attraction for FDI is a stable and predictable environment. During the administration of President Benigno Aquino III, perception of the Philippines has changed from one that is extremely unpredictable to one that is reasonably predictable. That is the single biggest reason for the turnaround in our economy and the flow of investments; the trust factor and the perception of a clean and honest government.

How can the Philippines further accelerate its ascension on the ease of doing business rankings?

DOMINGO: We will continue to pursue reforms and improve on initiatives that we have already started. A key part of our efforts are centred on automation processes. For example, we have partially automated the process of issuing business name registrations, reducing the processing time from one day to 15 minutes. Our planned e-payment system is also expected to go live soon, and this will allow users to do the entire process online without having to show up at our offices.

The Philippines Business Registry (PBR) is another initiative that the DTI is spearheading. PBR is an automated system that is linked to five national agencies, each of which requires business registrations. Using one unified form, PBR generates all the registration information from the five agencies in one go, including the tax identification number.

At the sub-national level, we are working closely with local governments as part of a nationwide programme to establish performance standards in terms of the maximum number of steps and number of days allowed to process business permits and licences.

How can the Philippines pursue the growth of its mature services sector while ensuring diversification into a manufacturing base?

DOMINGO: According to our GDP numbers, growth is broad-based. Agricultural expansion has accelerated and the services sector, which has been our strongest suit in the past decade, has continued to grow at a pace of more than 7%. However, the most positive surprise has been that manufacturing rose at the fastest rate.

Industry growth has been led by construction; however, manufacturing was up by 9.7% during the first quarter of 2013, outpacing services. Our IT/business process outsourcing sector continuous to grow from a very big base, capitalising on the country’s biggest asset: its human resources. In addition, there is a migration to higher value-added work, going from basic call-centre business to more complex professional services.

While most economies worry when services outpace the rest of the economy, we have demonstrated in the past 12 years that we can be a service-led economy and we will continue to support the sector. At the same time, however, we want to diversify our economy by supporting the expansion of manufacturing, especially considering the secondary effects of manufacturing in terms of the supply chains big firms form and the expertise they could develop for the country. This will enable sustainability in the years ahead.