MANILA — The Philippines is once again open for business, President Benigno Aquino likes to say. Trouble is, most investors want to window shop.
Three weeks after a trip to China, Aquino is in the United States this week, followed by a trip to Japan next week to press investment opportunities and spread the word to investors in major trading partners that things are changing.
It's not that anyone doubts the potential of the Philippines. Massive untapped mineral wealth, a prime position between Southeast and North Asia, a large, growing and English-speaking population, and more than 7,100 islands offer the scope for every type of tourist activity.
But bitter experience of endemic corruption, legal inconsistency, violence and stifling bureaucracy have made foreign business wary and seen the country fall behind its neighbors.
"It's about red tape, and about the weakness of institutions, infrastructure, and about electricity and traffic jams. It's nothing secret," said Toshinao Urabe, Japan's ambassador to the Philippines.
"We are attracted by the potential of the Philippine economy. You have a huge population, you have the resources," Urabe said, but then noted that foreign direct investment had lagged behind its neighbors.
The Philippines attracted just $1.7 billion, or 2.3 percent of the $75.6 billion of foreign direct investment that flowed into the 10 members of the Association of South East Asian Nations (ASEAN) in 2010, trailing Singapore, Indonesia, Malaysia, Vietnam and Thailand, data from ASEAN shows.
The business-process outsourcing sector is growing, and there is immediate potential in sectors such as mining and tourism, which have attracted foreign interest.
The country has mineral reserves, including massive gold and copper deposits, estimated to be worth around $1 trillion, but policy bottlenecks are hampering investments. .
The country would also appear to be a magnet for tourism with untouched beaches and incredible diving sites, just a two-hour flight from Hong Kong. But poor airports, infrastructure and security concerns have limited the sector's growth.
Among ASEAN countries, the Philippines ranks sixth for tourist arrivals, drawing just under 5 percent of almost 74 million people visiting the region in 2010.
Its 3.5 million tourists in 2010 is just one-seventh of Malaysia's region-leading 24.6 million, and lags Thailand, Singapore, Indonesia and Vietnam.
Derailed
Fifty years ago, the Philippines was Asia's tiger, set to follow Japan on the road to developed prosperity.
But the dictatorship of Ferdinand Marcos, built on corruption and cronyism, derailed that dream, and a quarter of a century after his downfall the Philippines has yet to recover.
"We are not where we should be," Aquino told Reuters in an interview. The interest is there, he says: his trip to China produced $7 billion to $9 billion of potential investments, and the government continually receives unsolicited proposals.
The challenge is to create an environment — regulatory, legal and investment — that turns the interest into reality.
As an example, Aquino said one airline and hotel conglomerate wanted to build 30 hotels, with the first two to open next year. However, the group had not decided what routes would be serviced or where all the hotels would be built.
In the end, that will depend on issues such as
airport facilities and links, quality of local roads and infrastructure, and dealing with different levels of government.
Improvement
Aquino's election last year raised hopes of improved governance after two administrations dogged by allegations of corruption and wrongdoing. But at the same time, the election was a reminder of what worries them about Manila.
Second to Aquino was Joseph Estrada, thrown out of office in 2001 and later convicted of plunder and jailed — only to be pardoned within weeks and able to run for president again.
Aquino has set about pursuing corruption allegations against public officials, enforcing tax laws to cut evasion and improve collections, and make government decisions more transparent.
And there are signs of improvement — the Philippines jumped 10 places to 75th in the World Economic Forum's global competitiveness index.
The government's fiscal management has been rewarded with upgrades by the three leading rating agencies, putting the country within reach a coveted investment grade ranking.
But the World Economic Forum also said the country lagged on the quality of public institutions, corruption, security, and infrastructure, and Transparency International's Corruption Perceptions Index shows how the Philippines has gone backwards.
In 2010, it ranked 134th out of 178 countries, behind Indonesia (110) and Vietnam (116). In 2001, the Philippines had ranked 65th out of 91 countries, and was seen as less corrupt than Vietnam (75) and Indonesia (88).
Legacy
Aquino's centerpiece policy of drawing investors is the ambitious public-private partnership (PPP) to improve roads, ports, airports and other infrastructure through attracting billions of dollars of private sector funds.
Ideally, the PPP scheme would ease pressure on government finances, improve national infrastructure and show investors that the business environment has changed.
But it has been a long time coming. The launch of the first round of projects has been continually delayed this year as projects have been reviewed, financing planned and efforts to make contracts secure and sound have taken longer than expected.
The risk is, with countries such as Malaysia, Thailand and Vietnam also looking for infrastructure funding and the global economic outlook darkening, investors will turn elsewhere.
Aquino casts rehabilitating the Philippines' economic credentials as an extension of the work of his parents, national heroes for their role in the overthrow of Marcos and restoration of democracy.
"I see my role really as to complete what they both started and nurtured. This would be the culmination that we finally have overcome that hump and that the progress will continue regardless of who is here," Aquino said.
"The greatest tragedy would be for the next generation to undergo the same problems we did. That would mean we're an utter failure."
— Reuters 
