US hits PH corruption, human rights violations, business monopolies

Published October 8, 2020, 3:40 PM

by Bernie Cahiles-Magkilat

The US government cited improvements in the Philippine economy and efforts to further ease doing business in the country, but noted the same issues such as corruption, the legal system, human rights violations as significant disincentive to foreign investments while big companies dominate the economic landscape crowding out smaller businesses.

This formed part of the US Department of State (DoS) 2020 Investment Climate Statement on the Philippines furnished by the Philippines of Department of Foreign Affairs Office of American Affairs to Trade and Industry Secretary Ramon M. Lopez.

“Restrictions on foreign ownership, inadequate public investment in infrastructure, and lack of transparency in procurement tenders hinder foreign investment. The Philippines’ regulatory regime remains ambiguous in many sectors of the economy, and corruption is a significant problem,” the report stated.

In addition, it said, “large, family-owned conglomerates, including San Miguel, Ayala, Aboitiz Equity Ventures, and SM Investments, dominate the economic landscape, crowding out other smaller businesses.”

The DoS report is prepared by economic officers stationed in US foreign service posts around the world, provides country-specific information on the business climates of over 170 countries and economies. It includes Information on Openness to Investment, Legal and Regulatory systems, Dispute Resolution, Intellectual Property Rights, Transparency, Performance Requirements, State-Owned Enterprises, Responsible Business Conduct, and Corruption. The DoS report serves as a resource to help US companies make informed business decisions on investing overseas.

Notably the DoS echoed the same points raised in the prior year’s Statement. On the positive side, the DoS noted the Philippines’ overall investment climate continues to improve, marked by the Standard & Poor’s 2019 upgrade of Philippines’ rating to BBB+; and investment grade sovereign credit ratings based on sound macroeconomic fundamentals.

While the DoS cited efforts like the CREATE Bill, it also stressed that the business environment is notably better within the special economic zones, particularly those available for export businesses operated by the Philippine Economic Zone Authority.

The US also said the country’s large, educated, English-speaking, and relatively low-cost Filipino workforce is also considered an advantage of the Philippine investment landscape.

It also cited amendments to existing legislation (Public Service Act, Retail Trade Liberalization Act, and Foreign Investment Act); updates to the Foreign Investment Negative List; the signing in 2019 of the IRR for The Ease of Doing Business and Efficient Government Service Delivery Law; and plans to spend more than $180 billion through 2022 to upgrade infrastructure under the Build Build Build program.

Although growing, the DoS said the Philippine Stock Exchange lags behind many of its neighbors in terms of size, product offerings, and trading activity. The securities market is also growing though still dominated by government bills and bonds.

It detailed that investment constraints and disincentives include foreign ownership limitations, poor infrastructure, high power costs, slow broadband connections, congestion in major cities and ports, slow and burdensome business registration process, regulatory inconsistencies, inefficient judicial system (including inexperienced judiciary in handling complex issues involving technology, science, and intellectual property cases), and corruption (the Bureau of Customs was considered one of the most corrupt agencies in the country).

On the legal front, the DoS said that investment disputes can take years to resolve due to systemic problems in Philippine courts. Lack of resources, understanding, and corruption make the already complex court processes protracted and expensive.      

“The Philippines’ most significant human rights problems were killings allegedly undertaken by vigilantes, security forces, and insurgents; cases of apparent governmental disregard for human rights and due process; corruption; and a weak and overburdened criminal justice system notable for slow court procedures, weak prosecutions, and poor cooperation between, police and investigators,” the report said.

In addition, the US government said that President Duterte’s administration continued a nationwide campaign, led primarily by the Philippine National Police (PNP), to eliminate illegal narcotics. The ongoing operation continues to receive worldwide attention for its harsh tactics.