MANILA - Three credit rating upgrades in a row is more than welcome, but businessmen today said weeding out corruption and ensuring the rule of law remain works in progress.

“Any upgrade is welcome news. Foreign investors will see this as another reason to come in and help sustain the Philippines’ economic growth,” Management Association of the Philippines (MAP) president Melito S. Salazar Jr. told InterAksyon.com.

Moody's Investors Service earlier today delivered the Philippines' third investment grade rating, months after Fitch Ratings and Standard and Poor's lifted the country out of junk status.

Moody's announcement roused the Philippine stock market from an otherwise slow trading day, giving investors an opportunity to scoop up bargains and cash in gains.

"This is a fitting cap to the country's aspiration to join first world countries. We expect more foreign direct investments, portfolio and capital flows to come in to our economy and capital markets," said Roberto Juanchito Dispo, president of First Metro Investments Corporation.

Makati Business Club (MBC) executive director Peter Angelo V. Perfecto, who is part of the Philippine business mission visiting the UK today, said the latest  rating upgrade reflects growing interest in the Philippines as an investment destination.

"This upgrade simply affirms what we are seeing here in London as part of an ongoing roadshow on the Philippines and what we saw in France just two weeks ago--that, indeed, the Philippines is open for business," Perfecto said in a text message.

European Chamber of Commerce of the Philippines (ECCP) president Michael K. Raueber said the upgrade "reduces the cost of development by lowering interest rates."

American Chamber of Commerce of the Philippines (AmCham) president Rhicke Jennings said the latest upgrade by Moody’s “is a testament to solid fiscal policies and strong fiscal discipline and management.”

“The economic cluster and the BSP [Bangko Sentral ng Pilipinas] can give themselves a pat on the back,” Jennings said.

More reform

But Raeuber cautioned that an investment grade status “does not by itself assure more investments, which are needed for inclusive growth and job generation.”

Businessmen noted that so much more reform has to be put in place before a flurry of brick-and-mortal foreign direct investments (FDI) set up shop in the country.

“The ratings will not translate into jobs or lower rates of poverty until barriers to doing business are reduced, with corruption, rule of law and bureaucracy at the top of the list,” Jennings said, noting that FDI flows into the Philippines remain weak compared with those of other Asean countries.

Salazar said the good news brought by the three credit rating upgrades “may not overcome the foreign businessmen’s concerns about recent actions of government agencies that are seen as negating contracting obligations and appealing to populist sentiments as well as going against existing provisions of contracts and interpretation thereof.”

Business groups, for instance, have expressed concern over a plan by state-run Metropolitan Waterworks and Sewerage System (MWSS) to remove the income tax perks enjoyed by its two private concessionaires.

Stable legal environment

German-Philippine Chamber of Commerce and Industry (GPCCI) president Gunter Matschuck said long-term investments like manufacturing require a stable legal environment.

“To be attractive, you have to have continuity. You cannot change laws on a short-term basis, because manufacturers invest for long-term so they need long-term commitments,” Matschuck told reporters during a briefing.

“Never change the rules in the middle of the game—that is the first thing that you do to investors,” he added.

For AmCham senior adviser John D. Forbes, the most pressing concern that the Aquino administration should address is the inefficient transport system.

“I’m currently stuck in bad traffic now,” Forbes said in a text message, “[so] let’s start with improving the ground transportation mess which is throughout Luzon.”

“[It] makes me sad that the current administration is unlikely to build a single kilometer of light rail transport,” Forbes said. The recent bidding for the long-delayed extension up to Cavite of the Light Rail Transit Line 1 (LRT1), for instance, was declared a failure.

Forbes said transportation projects should be expedited so the government can abide by its commitment to jack up public infrastructure spending to five percent of gross domestic product (GDP).

“If the country deepens investment climate reforms, it can expect further international recognition of its progress and more investment,” Forbes said.

Jennings said reforms should be implemented at an “accelerated pace so that businesses can prosper and expand to create much-needed jobs and opportunities.”

Source: Interaksyon (www.interaksyon.com); News; 3 October 2013