Opportunities in the Arangkada Growth Sectors


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An Arangkada presentation by John D. Forbes at FINEX October 14, 2011

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Opportunities in the Arangkada Growth Sectors

  1. 1. Opportunities in theArangkada Growth Sectors John D. Forbes Principal Author Senior AdviserInvestment Climate Improvement Project American Chamber of Commerce john@arangkadaphilippines.comFINEX 43rd ANNUAL CONFERENCE PROGRAM Philippine Investment Challenge: Building the Momentum October 13-14, 2011 Marriot Hotel, Manila
  2. 2. Arangkada Philippines 2010 is about the Seven BigWinner Sectors, with hundreds of tables, maps, andillustrations, 470 pages of text, and 471recommendations.It is a collaborative effort by over 300 domestic andforeign investors who participated over 6 months in9 Focus Group Discussions.Arangkada envisions a Philippines realizing the fullpotential of its people and resources and gaining itsproper place alongside Southeast Asia’s other largemiddle income economies.Accelerating, moving faster, even twice as fast, is themain theme of Arangkada.
  3. 3. Part 1: Growing Too SlowPart 2: Becoming More CompetitivePart 3: Seven Big Winner SectorsPart 4: General Business Environment
  4. 4. Real GDP Growth, ASEAN-6 Real GDP growth rates, ASEAN-6 Singapore Thailand 20% Philippines Malaysia 15% Vietnam Indonesia 10% 5% 0% -5% -10% -15% 1995 2008 1990 1991 1992 1993 1994 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2009 2010Philippine GDP growth has caught up with the ASEAN region.Philippine growth in the 90s was lowest of ASEAN-6. In lastdecade it improved, reaching 7.4% in 2010.Arangkada advocates achieving 9-10% annual growth.First half 2011 at 4.9% is only half this target. . Twice as fast(4.6% 2001-mid-2010)
  5. 5. Growth has not trickled down. Poverty remains high..Philippines has made less progress than other ASEANs in reducingpoverty. Future growth should be more inclusive.. 70% Philippines 60% Vietnam 50% Indonesia Malaysia 40% Thailand 30% 20% 10% 0% 1990-1995 1996-2000 2001-2003 2004-2006 Sources: PovcalNet (World Bank); Balisacan, Arsenio "Pathways out of Poverty." 2008; UNICEF for the urban-rural population distribution in Indonesia
  6. 6. FDI, Bn US$ % of 2010 Ave. FDI % of Regional Ave. 2000-ASEAN-6 Countries 2010 Total 2000-2010 2010Indonesia 13.3 17.3% 3.8 9.5%Malaysia 9.1 11.9% 4.7 11.6%Philippines 1.7 2.2% 1.6 4.1%Singapore 38.6 50.3% 19.6 48.8%Thailand 5.8 7.6% 6.5 16.1%Vietnam 8.2 10.7% 3.9 9.8%Total 76.7 100.0% 40.1 100.0%Source: UNCTAD
  7. 7. FDI, Bn US$ 16 Indonesia Vietnam 14 12 Malaysia Thailand 10 Philippines 8 6 4 2 0 -2 -4 -6Source: UNCTAD
  8. 8. See Interactive Map of ASEAN-6 FDI, Percentage of Regional FDI, 2000-2010
  9. 9. Creating Quality Jobs. Labor force of 38 millionhas increased 50% since 1990 and is projected togrow to 54 million in 2030.Doubling investment. Philippines FDI inflows areweakest of ASEAN-6. Domestic investment ratiolowest among ASEAN-6.Remittances are doubled-edge sword. Theysupport a GDP growth floor, but lead tocomplacency to avoid reforms needed to creategood jobs at home.Increasing and diversifying exports, which areover-dependent on electronics.
  10. 10. Headline Recommendations1. The new Philippine administration should consider adopting as a major high priority policy goal doubling the GDP growth rate to 9 percent and adopt and implement a plan to achieve this within 3 years. This has to be supported by a clear long-term industry policy.2. Job creation by the private sector should receive extremely high priority, to reduce unemployment and underemployment by 50% and to give Filipinos more alternatives to working abroad.3. FDI should be targeted to reach over US$ 7 billion a year in 3-4 years. FDI should also be measured in terms of job creation and exports (products and services) generated.4. An export target of US$ 100 billion in 5-6 years should be set, with more diversified exports and new markets.5. Adequate funds should be made available for international promotion of Philippine exports, inwards investments and tourism, medical travel and retirement programs.6. A significant share of remittances should be channeled into productive investments in the domestic economy through bonds and other funds.7. Double funds available for physical and social infrastructure, civil service quality improvement, investment, tourism and trade promotion, and other growth-promoting expenditures through less waste in government spending, more effective tax collection, and selectively increasing the Expanded Value Added Tax (EVAT), before other taxes.8. Public and private sectors should organize a Special Experts Group comprising economic, business, labor, and government leaders to recommend key reforms to make
  11. 11. Global competitiveness surveys, Philippine rankings *Red Font = Surveys monitored by National Competitiveness Council Previous RP ASEAN-6 Survey Title Years ranking Recent RP ranking position TrendASEAN Regional Survey 2003-10 N/A N/A N/A N/ABest Countries for Business 2008-10 84 of 127 91 of 128 5 of 6 DeterioratingFailed States Index 2006-11 53 of 177 51 of 177 6 of 6 ImprovedIndex of Economic Freedom 2001-11 109 of 179 115 of 179 4 of 6 Deteriorating*World CompetitivenessYearbook 2001-11 39 of 58 41 of 59 5 of 5 DeterioratingInternational Property Rights 2007-11 80 of 115 87 of 129 6 of 6 Stable*Corruption Perception Index 2001-11 139 of 180 To be released Oct. 26, 2011 - -Human Development Report 2001-11 105 of 182 To be released Nov. 9, 2011 - -E-governance ReadinessSurvey 2002-11 78 of 183 To be released in 2012 (biennial) - -Doing Business 2007-11 144 of 183 To be released Nov. 4, 2011 - -Investing Across Borders 2011 87 countries N/A N/A N/APaying Taxes 2008-11 135 of 183 124 of 183 4 of 6 ImprovedWorldwide GovernanceIndicators 2002-11 212 countries To be updated June 12, 2012 N/A N/A*Global Competitiveness Improved byReport 2001-11 85 of 139 75 of 142 6 of 6 10Global Enabling Trade Report 2008-11 82 of 125 To be released Nov. 1, 2011 - -Travel & TourismCompetitiveness 2007-11 86 of 133 94 of 139 6 of 6 DeterioratingEnvironmental Performance
  12. 12. ASEAN-6 Countries Overall Rank/142 Road Railroad Seaports Airports Electricity Telephone MobileIndonesia 82 83 52 103 80 98 79 82Malaysia 23 18 18 15 20 38 78 40Philippines 113 100 101 123 115 104 103 92Singapore 2 2 7 1 1 4 27 15Thailand 47 37 63 47 32 50 94 70Vietnam 123 123 71 111 95 109 70 5Philippines Ranking 5 of 6 5 of 6 6 of 6 6 of 6 6 of 6 5 of 6 6 of 6 6 of 6Source: WEF, Global Competitiveness Report 2011-2012NB: A total of 142 countries were ranked in the WEF GCR
  13. 13. Undertake aggressive efforts to improve rankingsmuch faster.Identify the competitiveness indicators mostimportant to investors. Then focus on theirimprovement (e.g. corruption, businesscosts, infrastructure, regulations, HRquality, political and policy stability).Create a national psychology to improveinternational competitiveness ratings overall andin specific critical areas.
  14. 14. Big Winner Sector Date # Participants # RecommendationsAgribusiness December 2009 15 18Business Process Outsourcing February 2010 28 30Creative Industries November 2010 16 16Infrastructure Policy Environment November 2009 25Infrastructure: Airports November 2009 38 15Infrastructure: Power November 2009 48 21Infrastructure: Roads and Rail November 2009 33 9Infrastructure: Seaports November 2009 20Infrastructure: Telecommunications None 11Infrastructure: Water November 2009 9Manufacturing and Logistics March 2010 35 17 + 25Mining November 2009 41 33Tourism, Medical Travel, and Retirement September 2009 36 34Total 290 283
  15. 15. Agribusiness
  16. 16. AGRIBUSINESS Headline Recommendations (of 18)1. Multiple new FTAs present great opportunity for RP agricultural exports. The farming sector should be made aware of these opportunities, as well as threats from imports, so the sector can adjust. Lowering cost of farm inputs – through improved infrastructure, lower ground and sea transport costs, less government red tape, cheaper fertilizer and insecticides – become even more essential. R&D, agricultural education, and training need ramping up.2. Agribusiness must update old models and develop new ones. By linking small crop farmers to global and domestic markets, large corporate integrators (foreign and domestic) are proving the RP can compete. The Philippine Agribusiness Center of DA should expand its export development projects.3. CARP should end in five years and limits on landholding lifted. The Farm Land as Collateral law should be passed, and the mandated lending policy in the Agri-Agra law should be made optional.
  17. 17. BUSINESS PROCESS OUTSOURCING Headline Recommendations (of 30)1. Strengthen the industry with a robust legal framework. The 15th Congress should pass as soon as possible: (1) Department of Information and Communication Technology, (2) Cybercrime, (3) Data Privacy, (4) Holiday Rationalization, and (5) much needed Labor Code amendments (all of which improve country competitiveness). Avoid new laws discouraging investment and that make it more difficult to operate businesses.2. Develop a highly positive and supportive environment for the industry. Achieve wide public understanding of the industry’s present and potential contribution to the economy and generate public support for the industry. Adopt the National Competency Test for hiring. Expand higher-speed broadband using new fiber-optic network in more cities. Maintain the fiscal incentive regime supportive of the sector and ensure LGUs are supportive of IT-BPO firms following the intent of PEZA/BOI guidelines. Promote the IT-BPO industry with an aggressive international marketing campaign.3. Raise quality and quantity of labor supply available to the industry. Implement educational reform to improve quality of graduates. Correct lack of exposure to spoken English by promoting use of English language in broadcast media and advertising. Use Internet cafes for English training. Increase computers in public schools and use computers for English training. Colleges should adopt curriculum that properly prepares students for IT-BPO careers, introduce integrated service, science, management courses and, industry- standard programs in English and technical courses. Expand more certification programs, scholarships, and management development programs.
  18. 18. Creative Industries
  19. 19. CREATIVE INDUSTRIES Headline Recommendations (of 16)1. Improve planning with a Philippine Creative Industries Master Plan, pass legislation to create the Creative Industries Development Council, and organize the private sector into a Creative Industries Initiative.2. Stimulate the overall creative industries environment with human resources development, rebrand the Philippine creative image, protect intellectual property, organize awards, exhibits and lectures, study foreign markets, reduce local costs, develop uniquely Filipino products, encourage tie-ups with large foreign firms, and encourage Filipino talent to stay home, as well as return home.3. Encourage foreigners to practice creative industry professions in the Philippines, as a key to attracting creative investments and R&D activities, resulting in technology transfer, investment, and job creation. Remove restrictions on foreign equity in advertising.
  20. 20. Infrastructure: Airports and Seaports
  21. 21. AIRPORTS Headline Recommendations (of 15)1. Prioritize investments in airport terminal, runway, and communication facilities. A Transportation Master Plan for Central Luzon until 2050 is needed. DMIA should become the primary international gateway and NAIA primarily a domestic airport. NAIA: renovate T-1 for wide-body international; connect T-1 and T-2; use T-3 for narrow-body domestic/international. DMIA will need a 2nd parallel runway, a new passenger terminal, and high-speed rail connection to NAIA/Makati. Settle the NAIA T-3 investor case.2. Each region should have one international airport only (convert existing airports). Prioritize Laguindingan. Expand Mactan. Reform the Civil Aviation Authority of the Philippines (CAAP) in order to reverse Federal Aviation Administration (FAA) and EU downgrades. Implement the Japanese government-funded Air Traffic Management Project of the Department of Transportation and Communications (DOTC).3. Prioritize international tourism and increase international carrier service through reduced costs and pocket open skies (starting with Palawan). Prepare for ASEAN open skies. Before more foreign airlines terminate Philippine service, replace Customs, Immigration, and Quarantine overtime, meal, and transportation fees with 24/7 government service and end unwarranted taxes on carriers (gross Philippine billings and
  22. 22. SEAPORTS Headline Recommendations (of 20)1. A NCR/Central Luzon Transportation Master Plan up to mid-century is needed and should include a strategy to utilize Batangas, Manila, and Subic seaports, with modern ground transportation links to industrial and urban centers. Manila should be decongested gradually, shifting international container traffic to Batangas and Subic. Develop cruise business at Manila and other major ports (see Map 4).2. All major ports should have complete infrastructure (terminals, cranes, yards, scales, silos, and discharging equipment and areas) under a hub-and-spoke system feeding goods by truck and RORO. Major RORO ports should have modern passenger terminals. Allow chassis RORO (cargo containers on chassis without truck). Reduce fees on all shipping. Increase consortium shipping arrangements.3. PPA should focus on an independent regulatory role and promote competitive participation in port operations. Activate the National Port Advisory Council. Pass the new Maritime Law. The Maritime Industry Authority (MARINA) should impose higher standards on shipping and follow international practice.
  23. 23. POWER Headline Recommendations (of 21)1. Challenge: There is no substitute for long-term power purchase agreements (PPAs) between creditworthy parties to support financing of new power generation projects. Lenders cannot and will not accept merchant risk or PPAs involving parties that do not have financial wherewithal to fulfill their contractual obligations. Solution: The Department of Energy could formulate policies and plans to address this challenge, such as credit enhancements, guarantees, incentives, and more.2. Challenge: Investments in new cost-effective power generation projects require initiation of open access and retail competition. Solution: Fulfill conditions precedent to declaration of Retail Competition and Open Access within 2010. All but one condition precedent has been fulfilled, namely transferring management and control of 70% of IPP contracts with NPC to IPP Administrators.3. Challenge: Investments in new cost-effective power generation projects require a viable WESM. The Luzon WESM has functioned well since mid-2006, but initiation of the Visayas WESM has been deferred for more than one year. Solution: Initiate Visayas WESM without further delay and integrate it with Luzon WESM. Initiate Mindanao WESM no later than mid-2011.4. Formulate an integrated energy policy plan including all energy sources, plant locations, investment/financing, energy efficiency. Enhance creditworthiness of distribution utilities and cooperatives. Prepare for nuclear power in a decade. Revisit take-or-pay for baseload plants. Remove restrictions on foreign equity in power projects. Develop a large coal plant on a small island with domestic/foreign coal. Introduce LNG for cleaner power and transportation. Privatize Agus and Pulangi dams by 2011.
  24. 24. WATER Headline Recommendations (of 9)1. Challenge: There is no substitute for long-term take-or-pay bulk water purchase agreements between creditworthy parties to support financing of new water supply projects. Solution: The GRP must enhance creditworthiness of water supply agencies such as the MWSS with performance undertakings. Alternatives: The MWSS concessionaires voluntarily enter into take-or-pay contracts for bulk water supply projects supported by their balance sheets or fund major new water supply projects directly.2. Challenge: Public policies, rules, and regulations for water are administered by numerous departments and agencies thereby undermining its development. Solutions: Rationalize water supply administration and policy via a Water Reform Act; strengthen the National Water Resources Board (NWRB). Establish a Department of Water and an independent water regulator. Develop a National Water Master Plan that identifies major water resources and treatment requirements; establish supportive policies, rules, and regulations.3. Challenge: New dams to provide additional water supplies for Metro Manila should be built. Solutions: Engage the private sector, preferably through transparent bidding. The policy disallowing "take-or-pay" and sovereign guarantees needs to be reviewed. Smaller and less expensive Sierra Madre or Wawa projects should be moved forward while the approach to the Laiban project is decided.4. Challenge: Irrigation and flood control desperately need reform and budgetary support. Solutions: Encourage the private sector to invest in irrigation using the BOT law or joint ventures with National Irrigation Administration (NIA). Reduce flooding by implementing measures to reduce the accumulation of silts and sediments and disposal of garbage in waterways. Prohibit development and construction of residences and commercial, industrial, or institutional structures
  25. 25. Infrastructure: Roads and Rail
  26. 26. INFRASTRUCTURE POLICY ENVIRONMENT Headline Recommendations (of 25)1. Double spending on infrastructure to 5% of GDP with a pipeline of PPP projects, professionally prepared and transparently bid and implemented. Draw on international technical assistance to move forward nearly PhP 200 billion in viable road and rail projects. Draw on nearly PhP 1 trillion in available local funds.2. Legal and procedural reforms will be needed to revitalize PPP programs. Amend the BOT law and its IRRs. Amend or rescind the JVA EO. Assure that the NEDA-ICC reviews all major projects. Strongly discourage unsolicited project proposals. Remove foreign equity restrictions. Speed up project approval process using timetables/deadlines. Release DBM funds in timely fashion. Use congressional CDF only for needed infrastructure. Create and follow a 10-year infrastructure master plan. Implement the National Transport Plan.3. Increase transparency and reduce corruption and controversy over infrastructure projects. Protect investors from political risks (TROs, LGU interference, right of way problems). Pass the Freedom of Access to Information Act. Develop a government on- line registry of projects and a private sector website to monitor the top 200-300 projects against guidelines. Disclose all JVA projects prior to MOA signing.
  27. 27. ROAD AND RAIL Headline Recommendations (of 9)1. Build expressways and national roads twice as fast, using PPPs as well as DPWH funds (see list below). Cost: US$ 3+ billion (not including national roads).2. Build intercity rail and urban light rail, especially on Luzon, twice as fast. Accelerate rail construction on Luzon, using PPPs as well as DOTC funds (see list below). Cost: US$ 11+ billion.3. National government budget should focus on the core road network. Major road and rail projects which government decides to be funded as PPPs should be bid out competitively and evaluated and awarded transparently. Unsolicited proposals should be minimized.4. Apply HDM-4 for roads. Create single light rail agency for Metro Manila.
  28. 28. MANUFACTURING Headline Recommendations (of 17)1. Increase priority given to manufacturing. Working with the private industry, the government should: (1) develop an industrial master plan, identifying the best opportunity sectors for the export of goods and services to global markets created by FTAs; (2) support the plan with consistent policies, fiscal incentives, legal, administrative, and other reforms; and (3) put a strong economic team in the cabinet that works in tandem with designated private sector leaders of the targeted global industries.2. Improve the business climate and level the playing field: (1) reduce the costs of doing business including electricity, transport infrastructure, domestic logistics, corruption, and red tape; (2) increase E2M coverage for customs; (3) professionalize the bureaucracy; (4) allow industry to operate free of government interference, such as price controls; (5) link minimum wage policies to productivity enhancements; (6) rationalize holidays; and (6) eliminate smuggling by sending smugglers to jail.3. Ramp up promotion of Philippine exports and investment: establish an export development fund to promote exports and investment; aggressively promote the Philippines at international trade fairs. Allow duty and tax-free importation of capital equipment.
  29. 29. LOGISTICS Headline Recommendations (of 25)1. Promote Batangas Port for CALABARZON-destined shipments and Subic for Luzon- destined shipments by inviting feeder vessel operators to call, linking them through Singapore, Kaohsiung, and Hong Kong to worldwide shipping.2. Develop Subic as a true freeport for logistics to the Asian region for goods from the US and Europe.3. Allow direct deconsolidation of cargoes to PEZA bonded warehouses instead of using non-PEZA CY/CFS operators.4. Develop a transshipment industry similar to Dubai and Singapore. Allow transshipment of cargo in various modes, air-air, sea-air, and air-sea by asking the BOC to implement relevant transshipment rules.5. Open the door to foreign investment along the entire multi-modal transportation chain.
  30. 30. MINING Headline Recommendations (of 33)1. Increase the growth of the mining sector by removing redundant approvals and non- performing claims. Exploration and similar permits should be granted transparently at the regional level within 6 weeks and renewed in one day at one-stop shops. Reduce environmental compliance certificate (ECC) processing time. Allow pre-permitting access to potential project lands. MGB should cancel permits after two years of non-performance. MGB should adopt Philippine Mineral Ore Resources Reserve Reporting Code. Develop model best-practice regions.2. Work closely with indigenous peoples; develop mining HR skills; monitor legal developments. Since most mines are in ancestral domains, involve IPs as partners from project commencement. Achieve a 50% increase in direct mining and milling costs allocated for community development. Implement release to LGUs of their share of mining taxes paid to the GRP. Improve salaries and practical skills of MGB staff. Develop mining engineering programs at universities. Implement the current Mining Act and avoid arbitrary application of the Writ of Kalikasan. Continue the Minerals Development Council.3. Carry out a public information campaign and increase dialogue with concerned groups. Inform the public about responsible mining that minimizes the environmental impact. Find common-ground solutions with LGUs, NGOs, religious leaders, and local communities to issues raised against specific projects. LGUs should not have mining bans against national policy. Encourage downstream processing/manufacturing. Source supplies from local communities. Endorse Extractive Industries Transparency Initiative.
  31. 31. TOURISM Headline Recommendations (of 34)1. Improve international connectivity – eliminate the Common Carriers Tax and Gross Philippine Billings tax on foreign airlines (not practiced elsewhere); implement 24/7 operations in international airports and seaports; reform the CAAP.2. Develop and implement national and destination masterplans and protect property rights of investors and communities in line with the Tourism Act of 2009. Promotional resources should be directed to key tourist regions with infrastructure and direct international flights, including Cebu/Bohol, Clark/Subic, Davao, Laoag, and Cagayan de Oro.3. Reduce costs of doing business and enhance mobility for travel and tourism enterprises and tourists across the value chain (e.g. implement sustainable tourism taxation (national and local), streamline procedures, travel tax, customs and immigration, licensing, amend Sanitation Code).
  32. 32. MEDICAL TRAVEL Headline Recommendations1. Pursue negotiations of public insurance portability for international medical travel and retirement; promote transparency of medical travel packages; develop and implement a national policy on wellness and medical travel.2. Facilitate seamless travel of medical travelers and health professionals (as part of exchange programs with overseas hospitals) by issuing longer medical tourism visas for patients and their companions and streamlining procedures. RETIREMENT Headline Recommendations1. Restrictions on foreigners should be liberalized in designated tourism and retirement zones to allow foreign ownership of land and retail facilities and the practice of professions. Until the constitutional limit on foreign ownership of land can be reformed, joint ventures with reputable Philippine corporations as well as GRP agencies and LGUs should be encouraged; rules and regulations for JVs with the government should be reviewed accordingly.2. Encourage co-investment by the Philippine Retirement Authority in infrastructure development to support long-stay tourism and retirement programs.
  33. 33. Issue NumberBusiness Costs 16Environment and Natural Disasters 14Foreign Equity and Professionals 12Governance 16Judicial 12Labor 9Legislation 13Local Government 16Macroeconomic Policy (Fiscal, Markets, Trade) 29Security 15Social Services: Poverty 4 Education 12 Health and Population 9TOTAL 177
  34. 34. Uncompetitive business costs (labor, holidays, marinetransport, power).High unemployment and brain drain; low labor productivity.Restrictions on foreign equity and professionals.Weak governance (corruption, red tape, smuggling).Slow judicial processes, weak rule of law.High taxes yet poor public revenue; large public sector deficit.Slow pace of legislative reform.Unclear authority of local vis-à-vis national government.Security (crime, insurgency, terrorism, warlordism, weakmilitary/police).Insufficient social services (education, health, reproductivehealth).
  35. 35. Business Costs Key Recommendations (of 16)1. Senior levels of public and private sectors should create a national culture of competitiveness. Strengthen national efforts to improve competitiveness by reducing business costs, including the NCC, and prepare an annual presidential report on competitiveness.2. Adjust minimum wages to be more in line with similar regional middle income economies, allow relief from minimum wages or piece work for distressed industries or other measures that maintain jobs instead of losing them to other countries, including developing new industrial zones with infrastructure that offer much lower wage rates. Reduce the burden of high holiday payroll expenses by reducing the number of non-working holidays.3. Reduce power costs for firms needing to maintain global competitiveness to survive. Introduce open access and power discounts. Modernize ground and marine transport to achieve competitive efficiencies.4. Accelerate efforts to greatly reduce the red tape burden on citizens and firms.
  36. 36. Environment and Natural Disasters Headline Recommendations (of 14)1. Implement policies prescribed by the Solid Waste Management Act, Clean Air Act, and Clean Water Act. Deal effectively with the solid waste challenge. Reduce air and water pollution. Clean rivers. Improve access to water and sanitation. Establish clear rules and standards that would allow modern incineration technologies. Amend the Clean Air Act to allow non- polluting clean incineration.2. Benefit tourism, agriculture, and fisheries by ending deforestation, beginning reforestation, and rebuilding damaged coral reefs.3. Emphasize disaster prevention as well as disaster relief. Reduce flooding by improving drainage, zoning, and infrastructure. Make cities safer against earthquakes. Plan effectively for the impact of climate change/global warming.
  37. 37. Foreign Equity and Professionals Headline Recommendations (of 12)1. A high-level commission should review current restrictions in the FINL and elsewhere and propose remedial measures, considering which will most increase investment and create jobs.2. Pending constitutional revision, creative but legal solutions, including the control test, should be applied to 60-40 ownership provisions, in order to increase investment and create jobs.3. Because foreign professionals can enhance national competitiveness and create jobs, the PRC should liberalize its procedures to accredit foreign professionals. The FINL should not include professionals. Philippine diplomacy should pursue global openness for Filipino professionals. Distinguish ownership of companies that provide professional services and execution of medical services.
  38. 38. Governance Headline Recommendations (of 16)1. Demonstrate firm, consistent political will to enforce laws against corruption forcefully in the public and private sectors, in revenue collection, and public expenditures. Government should join the Integrity Initiative and submit government departments to the same control mechanisms as the private sector. An impartial Ombudsman should be strengthened with trained staff. Private sector must do more to police its ranks and initiate compliance and integrity programs.2. Smuggling must be vigorously countered. The BOC with DOJ support should successfully prosecute smugglers. Further reform public sector procurement. Expand e-procurement, reform project selection process and bidding procedures, and intensify other efforts to reduce waste in public expenditures. Increase public sector transparency.3. Reduce the fiscal burden of GOCCs by fiscalizing, rationalizing, privatizing, and closing. Focus Congressional CDF more on priority social infrastructure needs. Undertake civil service reforms to professionalize government. Reduce red tape. Strengthen Corporate Governance; reduce abuse of intellectual property rights; Legalize jueteng.
  39. 39. Judicial Headline Recommendations (of 12)1. Continue judicial reforms to speed up justice in all courts by hiring more judges and increasing salaries. Continue to reduce the caseload of all courts by more encouragement of arbitrated settlements in civil cases. Improve BIR, BOC, and Ombudsman legal staff to prepare better cases with better prospects of successful prosecution and conviction.2. The Supreme Court should request amicus curiae expert advice in ruling on issues that may adversely impact on the investment climate. The Supreme Court could reduce its caseload by being more selective in accepting case. Rules of the Court should be changed to recognize foreign arbitration decisions without reopening cases.3. Create a special court for Strategic Investment Issues. Oversee the environmental courts so that application of Philippine environmental laws strongly supports responsible mining practices.
  40. 40. Labor Headline Recommendations (of 9)1. Modernize the Labor Code. Rationalize holidays. Allow overseas service firm workers compensatory days off. Maintain the flexible working arrangements introduced in recent years.2. Focus on improving labor productivity. Create several million new direct jobs and many more indirect jobs. Attract manufacturers relocating from China. Reduce the unemployment and underemployment rates.3. Continue to resolve differences without disruptive labor action. Allow self- regulation of companies with support of chambers of commerce and industry associations. Reform the NLRC. Further narrow the skill-jobs mismatch by revising curricula and training. Re-introduce dual training system and support greater interaction between TESDA and private sector.
  41. 41. Legislation Headline Recommendations (of 13)1. The president should hold regular LEDAC meetings of executive and congressional leaders. LEDAC should prioritize the administration’s legislative agenda and monitor its progress throughout the legislative process.2. Prioritize bills that improve competitiveness, increase investment and revenue, and create jobs, in order to accelerate economic growth. Use executive orders and revision of IRRs to start reforms, following up with legislation as needed. Deter market-inimical bills.3. Pass legislation much more rapidly, especially for business and economic reforms. Prioritize key legislation that was close to final passage in the 14th Congress or that reached 2nd/3rd reading in either the House or the Senate.
  42. 42. Local Government Headline Recommendations (of 16)1. Intensify programs to improve LGU governance to make them more efficient and competitive, prioritizing LGUs in the fastest-growing regions. Expand e-governance services on LGU websites to enable routine transactions and to provide information on budgets and procurement. Increase efforts to correct issues identified in IFC Doing Business ratings and reduce solicitation of bribes. It is essential that the National Government pays LGUs their tax share fairly and promptly. Intensify programs for LGU capacity building.2. LGUs should observe incentives, such as exemption from local taxes, awarded by the national government to investors under national laws. The LGU Code, when amended, should include language to make the foregoing application of national laws clear. Declare certain investments as strategic to take them out of the influence of LGUs.3. LGUs should strongly support the Seven Big Winner sectors: Agribusiness, BPO, Infrastructure, Manufacturing and Logistics, Mining, and Tourism, Medical Travel, and Retirement.
  43. 43. Macroeconomic Policy (Fiscal, Regulatory, Trade) Headline Recommendations (of 29)1. Constantly improve financial sector management. Reduce the record high public sector deficit, maintain low inflation, stable exchange rates, reduce debt service burden, increase capital spending, privatize more state assets, convey an austerity message, reduce congressional pork barrel.2. Maximize tax collection, jail smugglers and big tax evaders, using RATE and RATS. Use transparency/e-governance, National Single Window, E2M. Simplify taxes and fees. Undertake comprehensive tax reform to reduce CIT and individual income tax, while raising VAT, ACT, and fuel excise taxes. Reduce or eliminate small taxes and fees that increase business costs.3. Increase the low savings rate and strengthen capital markets. Increase independence of regulatory agencies and reduce the burden of government regulation on the private sector. Maintain policy predictability and stability. Take advantage of new trading opportunities.
  44. 44. Security Headline Recommendations (of 15)1. Improve political stability and reduce violence, terrorism, and human right abuses throughout the Philippines. Use different strategies to deal with the MILF, NPA, and ASG. Negotiate with the MILF and the NPA and use force to isolate/ eliminate the ASG.2. Reduce violence in Mindanao and increase economic development in the island’s poorest provinces. Develop and implement the Mindanao 2020 Peace and Development Plan, emphasizing better infrastructure and lower shipping costs. Reduce/eliminate warlordism. Expand CCT, Kalahli-CIDSS and other programs that reduce government neglect of population living in remote areas.3. Modernize the armed forces and police and increase their numbers. End extra-constitutional actions by any military units through reforms and discipline. Reduce crime, especially murders and kidnappings.
  45. 45. Social Services: Poverty Headline Recommendations1. Steadily reduce number of poor and poor as percentage of population.2. Reduce the incidence of hunger.3. Expand insurance coverage to include more poor.4. Successfully implement the expanded CCT program to include all 6.9 million poor Filipino families.
  46. 46. Education Headline Recommendations (of 12)1. Increase public education budget over several years to at least PhP 400 billion (3.5-4% of GDP) for better classrooms, more and better teachers quality, and reduced teacher/student ratio. Double average spending per student to ASEAN-6 average. Adopt K+12 model to extend basic education by two years and add a pre-elementary year.2. Constantly improve teacher quality and curriculum to produce graduates with skills required for higher quality jobs. Apply competency-based standards, more in-service training, maintain teacher welfare and morale. Increase study of math and science, technical/vocational skills training. Encourage college/post-graduate study in fields needed for specialized positions, including foreign languages. Intensify investment in technology for high school education to connect all 6,786 schools to Internet. Equip high school teachers with notebook computers and students with e-readers. Establish computerized English language centers in high schools.3. Strengthen higher education by providing more resources for world class centers of excellence. Expand scholarships/loans for higher education. Encourage more accredited foreign schools and foreign teachers. Undertake a vigorous public campaign to emphasize English language competency. Strengthen the Dual Education/Dual Technical System. Expand the internship period to prepare students better for employment.
  47. 47. Health and Population Headline Recommendations (of 9)1. Double national spending on healthcare to 2.5-3% of GDP. Direct spending to poorest Filipinos. Government hospitals should be modernized, rationalized, expanded, and many thousands of additional village health centers built. Provide better equipment and staff.2. Expand PhilHealth eventually to become UHC. Include poorest Filipinos at no cost, financed by premiums on higher-income groups.3. Cease misguided healthcare legislation that does not achieve policy goals. Use PPP to encourage private capital to invest in healthcare-related services.4. Government should target an achievable population growth rate, set parallel targets to increase contraception prevalence rate and to lower fertility rate, and design and implement a reproductive health program to achieve targets.5. Congress should pass a consensus version of reproductive health legislation. Private sector should support reproductive health policy legislation and assist employees to have smaller families.6. Government should reward poor families who have fewer children, PhilHealth should introduce a family planning requirement for hospital accreditation.
  48. 48. Enacted into Law: Financial Rehabilitation and Insolvency Act (RA 10142) – lapsed into law July 18, 2010 *GOCC Governance Act (Republic Act 10149) – signed June 6, 2011 *Repeal of Nightwork Prohibition for Women (RA 10151) – signed June 21, 2011 * LEDAC Priority Measures
  49. 49. Approved on Third Reading in the House:Direct Remittance to LGUs of their WIPO Copyright Treaty (Intellectual40% share from National Wealth Property Act Amendments)Taxes Senate: Pending Second ReadingSenate: Under Local Government Lemon LawTWG deliberation Senate: Under Trade and CommerceCustoms Modernization and Tariffs Committee deliberationAct Plastic Bag Regulation ActSenate: Under Ways and Means Senate: Under Trade and CommerceCommittee deliberation Committee deliberation*Data Privacy Act Regulating Profession -Senate: Committee Report being Environmental Planningrouted for signature Senate: Draft Committee Report for*Rationalization of Fiscal Incentives approval of Civil Service CommitteeSenate: Under Ways and MeansCommittee deliberation * LEDAC Priority Measures
  50. 50. Pending Second Reading: House Senate *AMLA Amendment Creation of the DICT Creation of the DICT Cybercrime Prevention Act *Fair Competition Law/ Anti-trust *Mandatory Healthcare Coverage LPG Industry Regulation and Safety Act *Reproductive Health Bill *Reproductive Health Bill *Whistle Blowers Protection Act Terrorism Financing Prevention and Suppression Act * LEDAC Priority Measures
  51. 51. Approved at Committee Level: *Institutionalizing National Land Use Policy *Land Administration and Reform Act Rural Bank Act Amendments * LEDAC Priority Measures
  52. 52. Under Technical Working Group Deliberation: House Senate *AFP Modernization CIQ Amendment Anti-smuggling Sustainable Forest Management *BOT Law Amendments Regulating Profession - Pharmacy Farm Land as Collateral *NFA Reorganization *Government Procurement Act Amendments * LEDAC Priority Measures
  53. 53. Under Committee Deliberation: House Senate Constitutional Amendments on Creative Industries Economic Provisions *Enhancing the Curriculum of Basic Freedom of Access to Information Education (12 years) Freedom of Access to Information Fiscal Responsibility * LEDAC Priority Measures
  54. 54. Bills Requiring Substantial Other Priority Legislation Reconsideration Corporate Social Responsibility Foreign Investments Act Amendments Security of Tenure Retail Trade Act Amendments Value Added Simplified Tax Clean Air Act Amendment Chinese Holiday Senior Citizens Act Amendment Declaring National Women’s day as a Rice and Corn Trade Amendment non-working holiday Milk Code Financial Sector Tax Neutrality Act Holiday Rationalization
  55. 55. 1,500 copies distributed to key stakeholders(media, leaders in all branches of GPH includingLGUs, private sector, embassies) Strengthening coalitions with the public and privatesectors to improve competitiveness and accelerateinvestment and job creation.
  56. 56. JFC conducted dialogues about Arangkadarecommendations with 58 government leaders in theCabinet, Congress, Supreme Court, internationaldonors, as well as business leaders. Advanced Arangkada reforms by buildingpartnerships with allies who also prioritize fast growthof 7 Big Winner Sectors for investment and jobs.
  57. 57. March 30 Arangkada Workshop – over 120 investorsand public sector partners assessed Arangkadarecommendations for the 7 Big Winners. 13 werecompleted; 72 are ongoing - of total of 283 We are organizing moderators/experts to continuallyupdate the Arangkada website to provide a balancedpicture of investment opportunities.
  58. 58. www.arangkadaphilippines.com www.investphilippines.info
  59. 59. Opening Page - with emphasis on the Arangkadatext as is, theresources and most importantly the Newsroomregarding updates.