Cut power cost, solve cargo woes – Moody’s

By Kathleen Martin (The Philippine Star) | Updated August 27, 2014 - 12:00am

MANILA, Philippines - Reducing the cost of power and improving cargo movement should be given more priority than amending the Constitution for the purpose of easing restrictions in foreign investments, a Moody’s Investors Service analyst said.

“On Charter change, I would note that liberalizing the constitutional restrictions on investment is not a panacea for the weak performance of Philippine FDI (foreign direct investment) relative to other countries in the region,” Christian de Guzman, vice president and senior analyst at Moody’s, said in an e-mail yesterday to The STAR.

“Arguably, further developing infrastructure in a way that lowers the cost of electricity or improves logistics efficiency, among others, may be more critical,” he said.

De Guzman made the comment as the House of Representatives began plenary debates on a resolution seeking to remove restrictive economic provisions of the Constitution to pave the way for more foreign investments. The cost of power in the country is one of the highest in the world. The Port of Manila, meanwhile, is heavily congested because of a daytime ban on trucks imposed by the city government.

Latest data from the central bank showed net FDI up 34 percent to $2.923 billion as of May, from $2.182 billion in the same period last year.

Despite the increase, the country remains a laggard in FDI compared to its peers in the Association of Southeast Asian Nations, the Metropolitan Bank & Trust Co. said in a research note earlier this month.

In the first quarter, the Philippines’ net FDI of $1.852 billion was lower than Indonesia’s $4.527 billion, Thailand’s $2.887 billion, and Vietnam’s $2.45 billion.

The Bangko Sentral ng Pilipinas has forecast net FDI to reach $1 billion this year, below the $3.86 billion recorded in 2013.

The central bank has said FDI inflows are expected to remain robust this year but this would be tempered by expansion activities of Filipino firms abroad.

De Guzman stressed that the Aquino government should continue working on reforms until the presidential elections in 2016.

“As I am not a political analyst, I’d rather not comment on the implications of a second Aquino administration. However, I would note that it may be more important to focus on the near-term outlook for reform,” De Guzman said.

“Indeed, reforms enacted in the near-term will have more of an impact only a few years down the road, regardless of who wins the presidency in 2016,” he added.

“The window for major reform during the current administration is fast closing, given that campaigning for the 2016 elections is likely to start in earnest late next year,” he pointed out.

The country boasts of investment grade ratings from the three biggest global debt watchers, including Moody’s. These credit rating agencies have all cited the Aquino government’s reforms and good governance as justification for the credit upgrades awarded to the Philippines.

The Philippine economy expanded by a stellar 7.2 percent last year, sustaining an already faster-than-expected 6.8 percent in 2012.

Moody’s this month concluded its annual review of the country’s credit score.  source