OBG talks to Helen Dee, Chairperson, Rizal Commercial Banking Corporation

Interview: Helen Dee

Which sectors have the highest investment and growth potential in the medium term?

HELEN DEE: The mining, energy and environmental sectors continue to attract investors, both internationally and domestically, and the power industry offers rich opportunities for collaboration and investment. The Philippines needs to attract both foreign and local investors to pursue projects like waste-to-energy facilities, which provide a more viable alternative to sanitary landfills.

Still, infrastructure development in projects like highways, bridges and ports will generate the highest investments. The private sector agrees that infrastructure modernisation and the construction of these facilities are essential to economic growth and therefore it freely supports the public-private partnership (PPP) programme currently being laid out by the administration.

Although the government has already communicated the main vision of the PPP programme, most projects are still in the feasibility assessment stage. In order to move things forward, proper incentives need to be provided to encourage the private sphere to participate. Additionally, a strict regulatory environment needs to be adopted and followed by all participants.

How can the government and the private sector make the Philippines more competitive globally?

DEE: The government must coordinate with the private sector to ensure there are minimal changes in rules and directions, as routine policy fluctuations make planning and investment more challenging. An example can be seen in the government’s current focus on improving tax collection rates, something that has become increasingly complex and time-consuming. Such complicated policies can scare off potential investors and a lack of consistency in this regard makes the Philippines less competitive in the region.

The government must also reconsider the viability of the new rules and regulations that have been put in place. For instance, the real estate investment trust law implemented in 2010 has actually discouraged the involvement of many of its intended participants. Real estate companies are unanimous in the opinion that the rules are impractical and unworkable. Regulators must now address issues with the current law and establish more acceptable rules and regulations.

The effects of the administration’s broader regulatory changes have thus far been limited. The government has been very careful in disbursing funds and a number of projects have been delayed as a result. While the country’s overall fiscal situation has improved and a scheme for development and investment has been laid out in the Philippine Development Plan, more needs to be done in the coming years.

The Aquino administration is now expected to move its focus towards effective implementation. But before the government’s various programmes and initiatives can be put into use, comprehensive regulations must be established and adhered to by all parties.

How will a growing middle class change the demand structure of the domestic economy?

DEE: The robust domestic consumption of the middle class is responsible for the Philippines’ resilience against the global financial downturn. The domestic consumption from this segment routinely accounts for a substantial portion of economic activity, and a number of economists now consider the country among the top emerging markets to lead the world in economic growth over the next two decades because of it.

This growth is happening all across Asia. In 1990, the middle class comprised about 21% of Asia’s population; this rose to 56% in 2008 and is expected to continue rising. This expansion is feeding the demand of consumer markets for goods and services. Once it is fused with more enlightened economic policies and better governance, a larger population of middle class Filipinos will be a valuable asset fuelling the engine of domestic consumption and higher growth rates and working to enlarge the economic significance of emerging markets throughout Asia and the rest of the world.