IMF official says PH needs to address investment barriers

By Iris C. Gonzales, The Philippine Star

Posted at Oct 09 2012 07:35 AM | Updated as of Oct 09 2012 09:53 PM

MANILA, Philippines - The Philippine government can increase the value of foreign direct investment (FDIs) in the country by creating a more competitive environment and by addressing barriers to investment such as corruption, an International Monetary Fund (IMF) official said.

IMF fiscal department advisor Kiyoshi Nakayama said that tax incentives are not the primary factor that influences investors.

In the Philippines, he said infrastructure, integrity of public institutions, education and training and other issues need to be improved to be competitive.

“Tax incentives are not primary factors for multinational corporations to decide FDI location,” he said in a presentation during a recent IMF-Department of Finance joint workshop on fiscal incentives.

To improve infrastructure, public institutions and other factors affecting the country’s competitiveness, Nakayama said the Philippines needs to raise more revenues.

“The government needs to mobilize revenue by streamlining tax incentives that have negative and unintended consequences,” Nakayama said.

Citing a study by the Philippine Institute for Development Studies (PIDS) in March 2012, he also said the government must implement substantial reforms in all stages of education and training system to raise the learning capabilities of firms and upgrade labor skills.

As for barriers to investment, Nakayama said corruption, customs procedures as well as legal infrastructure are among the issues that have been cited by investors in the Philippines.

At the same time, he cited the strengths of the Philippines as an investment site such as the availability of trained labor and competitive housing and lease rates.

The Departments of Trade and Finance are pushing for a measure that would rationalize fiscal incentives given to investors. A bill has been filed in Congress but lawmakers have yet to approve the measure.

The position of the Finance department is that there should be a limit in the grant of incentives to investors, only with the possibility for renewing these incentives if deemed necessary.

Aside from the fiscal incentives measure, the government is also pushing for a measure that would raise taxes on sin products such as alcohol and cigarettes.

Revenues to be raised from the passage of the measures would fund the government’s social services projects such as access to quality health care, economic managers have said.