MANILA, Philippines – Attracting foreign direct investments (FDI) to the country rests largely on the ability of local government units (LGUs) to cut red tape, according to Malacañang.

Deputy presidential spokesperson Abigail Valte made the comment after the Palace belatedly acknowledged that the Philippines lagged behind other Southeast Asian countries that got much of the investment pie.

In the 2013 World Investment Report released last week by the United Nations Conference on Trade and Development (UNCTAD), the Philippines posted only $2.79 billion FDI inflows last year, way behind Indonesia's $19.8 billion and Thailand's $8.6 billion.

Vietnam drew in $8.3 billion while Malaysia lured $10 billion.

"What is noteworthy is that Myanmar nearly equaled the Philippines' FDI by tapping $2.24 billion, and Cambodia drew $1.55 billion," said Norio Usui, senior country economist of the Philippine country office of the Asian Development Bank.

Valte stressed that much needs to be done in the local level, noting that business permits, mayor's permits, sanitation permits and many other requisites are secured from LGUs.
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"We have a big challenge ahead of us that we are currently facing because of what we call - in layman's terms - the red tape. What are our efforts there? We have our law that prohibits red tape: the Anti-Red Tape Act," Valte said.

In a briefing last Friday, the Palace spokesperson disclosed that President Aquino imposed "very early on in the administration" several ways on how to expedite and simplify local and foreign business transactions with government.

This scheme has been dubbed as "Philippine Business Registry System," a one-stop-shop where entrepreneurs can register their businesses with the Department of Trade and Industry, Bureau of Internal Revenue, Securities and Exchange Commission or even SSS online.

With this system, "it would be much easier for small enterprises to do startups and for them not to transfer their shops from one place to another," Valte explained.

"What we're doing now is we are encouraging our LGUs to streamline their processes and cut the number of their permits so that there will be more business in the country," she added.

This is why the national government has adopted a Performance Challenge Fund, because of which the LGUs have been competing with each other to win the "Seal of Good Housekeeping" prize, she said.

"We are hoping that this is a continuing effort that will encourage LGUs to also streamline their procedures, because if it's already okay with the national government, then this should follow suit in the local level," Valte said.

"This is for our investors, so that they can easily start up their businesses in whatever municipality they want to invest in," she added.

FDI in Southeast Asia

The whole of Southeast Asia managed to attract a total of $111.3 billion in FDIs.

Last year's $2.79 billion FDIs to the Philippines, however, is 54 percent higher than the $1.81 billion in 2011.

As a percentage of gross fixed capital formation, the FDI inflows were just 5.6 percent. This is higher than the 4.2 percent in 2011 but just half of the pre-crisis 2005-2007 annual average of 10.3 percent.

In contrast, Indonesia's inflows last year had more than twice the size of its pre-crisis average of $6.7 billion.

The UNCTAD report said Southeast Asia experienced a modest two-percent increase in FDIs, with Singapore as biggest contributor, attracting $57 billion last year.

Developing countries accounted for 52 percent of global FDI flows as developed nations took a beating and settled for just 42 percent, while the poorest states settled for the remaining six percent.

By Delon Porcalla (The Philippine Star)

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