Government hit anew on changing of rules

| August 1, 2013 | 0 Comments

The European Chamber of Commerce of the Philippines (ECCP)—making a litany of “discouraging” changes in rules midstream—warned the government anew that there could be an exodus of foreign investors from the country if it does not do away with its wishy-washy tendencies.

ECCP Vice President for External Affairs Henry Schumacher said changing rules in the middle of the game makes investors nervous and more reluctant to commit to long-term investments.

Although the country’s economy is on a robust-growth mode in the previous quarters, the Philippines remains a Southeast Asian laggard when it comes to foreign direct investment inflows due to several reasons, including the wobbly characteristic of the government’s policies that affect businesses.

“Who guarantees that the rules agreed with this administration will be honored by successive governments?
The government has to understand that ‘trust’ is the asset it has to have,” said Schumacher.

He said the “bashing” that Manila Water Co. and Maynilad Water Services Inc. went through recently in connection with their concession agreement with the state-run Metropolitan Waterworks and Sewerage System (MWSS) illustrated the difficulty in doing business with the government.

“These billings have been in place for more than 15 years, were agreed to by MWSS in the concession agreement it signed with them in 1997, and which is effective up to 2022,” said Schumacher.

“After all these years, the MWSS suddenly found something wrong with the water charges. This controversy, another midstream change, will certainly end up in the Supreme Court,” he added.

Schumacher also pointed to the current review of the mining law and the attempt to change the mining-tax scheme could discourage existing miners and force them to leave.

“Another example will be the review of the mining law and the attempt to change the Mining Fiscal Regime. Will new miners come? Unlikely. Will existing miners go? More likely,” he said.

The ECCP official also pointed to the case of San Roque Power Corp., saying it stands for many investors who will be “short-changed” by the government if the Supreme Court does not change its verdict on the grant of duty-free and tax-free importation of capital goods to “progressive” from “retroactive.”

“The RP Energy case in Subic is another example. Infrastructure projects of national significance should be given priority and importance. They should be insulated from unfounded issues that only result in costly delays in the implementation of such projects,” said Schumacher.

“Executives expect to have to navigate the country’s bad infrastructure, the rigid labor market, red tape and remaining pockets of corruption. They are certainly not keen on tripping over the fine print of laws and implementing rules and regulations, and local power brokers with agendas at odds with Manila,” he added.

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