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S.M.N.I. Truth That Matters

Dr. Paya, welcome to Business of Politics.

Sir Demay, I call you Teo?

Yes, yes, please.

Thank you for making time.

Thank you, Mr. Ang, for having me here.

Oh, just please call me Clink.

Sir, there are a lot of exciting things happening in your area of concern.

Of course, there are opportunities

with now the implementation of the Regional Comprehensive Economic Partnership, or RCEP.

But of course, there are also many challenges that the country itself, not just PESA, is facing.

Can you please start with what is the situation as you see it today?

Where are the things that are encouraging?

And what are some of the things that concern you?

Okay, yeah, thank you for that question.

I'd like to start with looking at the potentials of the Philippines in terms of our current accession,

our recent accession to the RCEP.

Currently, we have companies in the economic zones that are already coming from the RCEP member countries.

But we have non-traditional sources of investments that are part of the RCEPs,

the likes of Australia and New Zealand, India.

So these are the exciting economies that we'd like to tap for investments as well as exports.

So right now, we're doing well with our investment promotions.

Last year, we were able to achieve a 103% increase in investments over 2021, and we're able to sustain that.

So year on year?

Yes, and that we're able to sustain the momentum up to this year, January to May.

And at present, we're able to achieve already 150% increase in our investments.

So the challenges, of course, it has to do always with the cost of doing business as well as the ease of doing business.

On the ease of doing business, we're able to address that because of the President's recent issuance of EO18,

providing for green lanes for our investors.

This has been the selling point of PESA whenever we invite investors to locate in the economic zone.

So we're quite familiar with that already.

On the cost of doing business, the number one concern of our locators is the cost of power.

And we're trying to address that by subscribing to that principle of distributed energy system,

where we are able to invite investors to actually set up, embed facilities inside the economic zone.

Like if we have an embedded power, it's able to provide energy for our locator companies that is devoid of transmission.

So somehow we're able to reduce those power.

You don't rely on the national grid and others?

Yes.

Okay.

I'd like to go back to that for a minute.

But a lot of people are saying that there are a lot of good things happening on the domestic side, especially with the new administration.

Of course, there are problems.

But the more concerning things, I don't know if you would agree with this, they say are the external headwinds.

A lot of people were predicting that 2023 will be slower in terms of growth compared to last year.

Of course, last year we had a big bounce back from the pandemic.

There is that continuing war in Ukraine that is still causing havoc in a number of ways, including fuel prices.

There are problems in the United States with their recession and the depreciation or appreciation of the dollar or depreciation of the peso, depending on how you look at it.

Does that concern you?

Because at the beginning of the year, the big news was the big drop-off in foreign direct investments of about 30% in the first quarter.

Is that a seasonal thing?

Are you still optimistic about this year, despite all of the external things happening around the world that the Philippines is dealing with along with the rest of the world?

Yes.

Well, definitely it's a cause for concern.

It's coming from our locators because they compete in the global market.

Sure.

And we cannot help it, but they'll be affected somehow by the headwinds, the external events happening around the world.

But our saving grace now is that even up to this point, we continue to generate positive growth in investments.

So we're catering to companies that are not only selling to the U.S. and Europe, although these are the biggest markets for our ecosystem locators.

The big bulk of our exports are also into intra-ASEAN, which is good because Asia Pacific now with ASEAN becoming more vibrant as a market compared to the U.S. and the Europe.

But the big sectors in peso, the likes of electronics, they've already calibrated their growth target from 10% to 5%, so we're closely monitoring that.

On the other hand, in the case of ITBPO, they continue to retain their 10% growth target.

Okay.

But because we're catering to a diverse mix of industries, we are keeping for now our conservative growth target of 10%.

Okay.

The reason why we remain bullish is that other than electronics and IT, we're looking at other sectors as part of our sources for investments.

Like I've mentioned that we're keeping our 10% growth target because in the case of the Philippines, they're also projecting a 6% to 7% GDP growth target, a bit lower than what we have achieved in 2022.

But from our historical performance, every time the country is projecting a positive growth, let's say for this year it's about 6% to 7%, that makes the Philippines already one of the best performing economies in the region.

And from our experience, every time we have a high growth target, we're able to bring in also FDI.

And this shows already in the investment approvals of PESA, despite the headwinds, the other factors affecting global trade, we continue to achieve a positive growth in our investment approvals, including exports.

That's very encouraging.

We talked about RCEP.

I mentioned it and you reacted to it.

One of the things that we wrote at Manila Times was that we should have ratified it much sooner.

The previous administration was saying that there may be an opportunity loss if we waited too long.

And lo and behold, what happened was that the Philippines was the last to ratify it and put it into effect.

Does that worry you at all that we are late coming into the game or does it really matter?

Because you're talking to the potential investors, right?

And you're still, as you said, confident about your target this year.

Did it really matter or were there opportunity losses there?

Well, it's important that we acceded to the RCEP, although we came in quite late in the ballgame.

But from our investment approvals as the basis for determining whether we're coming in quite late or does it really affect us after all,

among RCEP member countries, we're quite strong already in investments coming from the likes of South Korea, even Japan.

But for non-traditional sources, these are the new sources of investments that we're looking at,

not just for investments but also exports.

So China is very important.

China happens to be our best bet when it comes to new investments for this year.

Even Taiwan.

And we're looking at not just companies relocating, shifting out of China for production facility,

but we're inviting the admirable companies that are really mainland China-based companies.

And we have a number already operating in the economic zones.

And these are global industry leaders in their own right.

Okay.

So with our entry into RCEP, we're anticipating that more investments, especially coming from China, will be located in the Philippines.

And some of our big-ticket investments for the year are coming from China.

I see.

Now, one of the arguments we were making back then, and please tell us if we were right on this or maybe we were wrong,

but that RCEP's value was that it would put the Philippines in the zone where foreign investors could come in

and then serve that RCEP area, which includes all of ASEAN, China, Japan, South Korea, then, of course, Australia and New Zealand.

Japan as well.

I forgot to add that.

Is that a valid way to look at RCEP?

Is that the way the Philippines is trying to promote it, that we're inviting foreign investors to come here,

we're in the middle of this free trade area that's the largest in the world,

and then you can serve all of these big markets that are part also of that treaty?

Is that how it should be seen or is the value something else?

Well, we always look at the value added whenever we participate in a new free trade agreement.

And I'm sure our cabinet, our economists have seen that we're a lot better of participating than not participating at all.

So it's good that we're part of the RCEP as a new free trade area.

And we're looking at a larger market.

I think that's about one-third of the global trade.

And this is always an opportunity for us to be engaging with other economies,

other than the traditional sources like I mentioned, Japan, South Korea.

So with this, this will be a two-way trade, not just from exports coming from the Philippines,

but how we can also tap into companies exporting to the Philippines

so they could be our imports to support our industrialization, our consumer needs,

and something that will adhere to rules-based when it comes to promoting trade and investments, including movement of people.

Okay. I was surprised to hear you say that there are also some Chinese companies that you're looking at

or were talking to, to possibly invest in the Philippines as part of the RCEP agreement.

Can you talk about that a little bit? And I guess as a follow-up to that,

does it concern you what's going on with the ongoing tensions with the West Philippine Sea

that somehow that is going to be disrupted by that?

I know it's important for you to keep on talking, but is there a concern that maybe all of the good deals

that you're trying to hatch are going to be derailed by geopolitical issues

that are totally unrelated to PESA's work and the work for investment promotions?

Okay. So from our end in PESA, because our role is essentially into investment promotions,

we do not involve ourselves much into the geopolitics dynamics of it.

Our thinking is that if we're able to bridge these Chinese investments coming to the Philippines to invest,

somehow it's able to mitigate the tension, whatever is going on there on the geopolitical side.

Could help, right?

Yes, yes. So if we're able to attract more Chinese investments, which is the business model, by the way,

it's not just setting up in the Philippines to sell to the local market,

but we can be their hub also in terms of exporting to the U.S. and the Europe.

In ASEAN, it's important to know that the Philippines is the only economy that enjoys GSP+.

So I'm sure they must have realized that there are a lot better of exporting coming from the Philippines

instead of China, so that they're able to avail of zero duty.

GSP for the Europe, GSP U.S.?

Yes, both, but in the U.S. it's still being renewed.

Yeah, by Congress.

It's still in effect in EU, so it's a big plus to them.

And another compelling factor is that they're able to capitalize on our labor force.

So they're able to manufacture here for global distribution as well as supplying to the local market.

DG, I have to take a quick break, but before I do, could you name the industries from China

that are, you know, where these companies are interested from?

Yes, for one, the biggest steel producer now in the Philippines is out of Panwa.

Okay.

They're from Jangjagang in Chongqing.

They're already constructing their facility in Sarangani.

So when they finally commission their steel mill, it will be able to provide us with all our steel materials

and help us accelerate our industrialization because, you know, steel being a backbone for production.

And we have admirable companies like CNU, which is one of the biggest producers of industrial bearing.

They're already here.

There's one company out of Xiamen, which is producing quartz table countertops,

which is a big brand in Europe.

There's one grandson that even took in LeBron James as their model for headset.

This is high-tech headset.

And even the biggest, one of the biggest ice cream makers in the world in ice.

They call it ice.

The company is already in the Philippines.

And in the news lately, you read about Yadaya, which we're trying to invite in the Philippines.

They met with us twice already and scouting for a location.

They're the biggest producer of e-motorcycle in China.

So they have facilities in Vietnam, in Indonesia, in Thailand.

They're even into robotics.

And they've already expressed their interest to apply with BESA to do manufacturing of e-motorcycles with e-batteries in the Philippines.

Very interesting.

Thank you for watching!