"LOW INTEREST rates and a large, skilled labor force bode well for foreign direct investments, the central bank chief said at a conference yesterday, but speakers there noted that inflation risks, red tape, and power costs would have to be addressed as well to continue to lure business.
""The average inflation for the last three consecutive years has been within the target. With low inflation, domestic interest rates have been kept low," Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr. said at the second day of Euromoney-sponsored Philippines Investment Forum.
"This should help bring about conditions that would encourage foreign businesses to invest, he added.
""Growth is achieved in a macroeconomic environment of low inflation and monetary policies that support expansion," he said.
""We will continue to provide a sound monetary policy framework that is calibrated, flexible, and well communicated to stakeholders."
"Inflation slowed to 2.7% in February from a month earlier, prompting the central bank to cut policy rates anew by 25 basis points -- the second time this year. The BSP has forecast inflation to average within the low end of its 3-5% target.
"[T]he Philippines is [also] entering its demographic sweet spot with a mean age of 22.2 years old," Mr. Tetangco added.
Investors in the country, he claimed, will benefit from a young workforce, a "demographic dividend" that will provide a window of opportunity for the Philippines to pick up its growth pace.
Trade Secretary Gregory L. Domingo, meanwhile, said: "The Philippines has been increasing its competitiveness in attracting investments."
"Labor wages are now cheaper than the coastal areas of China, so we are seeing investment inflows from them. We also have low inflation, a good fiscal situation and improving infrastructure," he added.
Such conditions, the officials said, should enable the Philippines to capitalize on its traditional competitive advantages, most notably its young and skilled English-speaking talent pool.
Noberto A. Viera, Texas Instruments Philippines, Inc. managing director, said the Philippines’ edge was in its labor force.
"We can buy technology and equipment, but how do you make the most of your investment? You need skilled people for that," he said.
Mr. Domingo reported that the country has been experiencing an influx of investment missions from abroad, namely from Japan, Germany, Qatar, Turkey, Iran, Kuwait and the Czech Republic, to name a few.
"Based on what I’ve seen on the ground, I believe we’re going to exceed a GDP (gross domestic product) growth of 7%," he claimed.
Mr. Tetangco, meanwhile, reiterated warnings that the Philippines was facing global headwinds from a sluggish Western economy and a fragile Middle Eastern political climate. For March, he said "inflation risks could develop from a persistent surge in oil prices" and consequently increase pressure to raise wages.
The Trade Union Congress of the Philippines has so far filed for minimum wages hikes in three regions, among them a P90 per day adjustment for Metro Manila.
Other speakers at the conference said investors interested in the Philippines also had to contend with a many-layered bureaucracy and high power costs, among others.
"I know there are six investment promotions [agencies] that we have to deal with, but PEZA (Philippine Economic Zone Authority) is a major contributor. It would be helpful to streamline this system even more," J. V. Emmanuel de Dios, General Electric Philippines, Inc. president and chief executive, said.
Energy Secretary Jose Rene D. Almendras, for his part, defended the government’s refusal to interfere with free market forces with regard to power rates.
Nevertheless, Edgar O. Chua, Pilipinas Shell Petroleum Corp. country chairman, projected lower power rates for the country in the future.
""We know many countries are trying to get out of the situation of subsidized power, because it’s not sustainable," he said."
