July 19, 2018, 4:10 am
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Red tape an issue; gov’t spending effect minimal

While Philippine CEOs are bullish of business prospects, bureaucracy remains their top concern in doing business in the country.

A great majority of the CEOs also cited government spending had very little impact on the growth of their businesses.

The OBG Business Barometer: Philippines CEO Survey showed that 100 percent of respondents have either positive (75 percent) or very positive (25 percent) expectations for local business in 2017.

However, CEOs interviewed by Oxford Business Group (OBG) said that only 20 percent of their business growth was driven by government spending, confirming the widely held view that the economy is expanding thanks to private sector activity.

A total of 58.3 percent cited bureaucracy as their top hurdle in running operations.

The second most common issue was human resources, with 37.5 percent of C-suite (senior management) executives identifying human resource as a potential business risk.

Surprisingly, cost of capital ranked low on the list of concerns, cited by only 4.2 percent of respondents as a top problem.

The report said the executives will increase their planned investments, which should support economic growth of around 7 percent in 2018, based on estimates.

Some 70 percent of executives interviewed said they intended to make a significant capital investment within the next 12 months, while less than 30 percent said new investment was unlikely in the short term.

On the most pressing shortcomings in the Philippine business environment, 50 percent of respondents cited leadership skills. A lack of research and development was second in line, identified by 25 percent of CEOs; while business administration, IT and engineering skills appear to be relatively well supplied, with just 17 percent of respondents highlighting these factors as a major concern.

These findings all but strengthen the Philippines position as an emerging Southeast Asian economy following decades of underperformance. In contrast to other “Asian tigers” like Thailand, Malaysia, South Korea, Singapore and Japan, the Philippines’ service sector has been the driving force behind high economic growth, OBG said.

But OBG said there are challenges ahead.

“The country needs to improve outdated infrastructure, lower the cost of electricity and expand its manufacturing sector,” it added.

But it said the most critical hurdle to overcome is the change in the country’s constitution, which caps equity holdings at 50 percent, restricting foreign investors’ control of their assets.

While this is not cited as a major issue, the signal to global investment community is that the Philippines lacks the confidence to allow free inflows of capital, OBG said. – Reuters
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