Monday, Dec 18, 2017
Industry & Trade | Asia-Pacific | Philippines

Investing in the Philippines

JICA, supporting Japanese companies in the Philippines for over 60 years


3 months ago

Mr. Susumu Ito, Chief Representative of the Japan International Cooperation Agency (JICA)
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Mr. Susumu Ito

Chief Representative of the Japan International Cooperation Agency (JICA)

Mr. Susumu Ito, Chief Representative of the Japan International Cooperation Agency (JICA), talks about how JICA has supported the growth of the the Filipino economy and the advantages of investing the Philippines for Japanese companies

The Philippines has been the best performing Southeast Asian economy with a YOY growth of 6.8% and an estimated 6.8-7% growth in Q1 2017. To make sure this growth is sustainable, the government has put in place initiatives such as a 10-point economic plan, tax reform, IPPs, contractual order and expansionary budget with emphasis in infrastructure. In your opinion, how important are the initiatives of the current administration regarding economic planning to achieve a stable growth in the future?

First of all, JICA fully supports the 10-point socioeconomic agenda of the Duterte administration. When this was announced June last year, JICA immediately understood the logic behind all the inclusions or points in the president’s agenda. We deem all these points as very good policies.

For example, the continuity of the macroeconomic policies plays a very important role. This entails continuing the projects or activities that were introduced by the previous administration which were well-received or accepted by the international communities. Moreover, the progressive tax reform is very important to attain inclusive or egalitarian growth. Lastly, the increase on infrastructure spending is likewise crucial in putting the country at par with its Southeast Asian counterparts. To date, the Duterte administration has committed to increasing the infrastructure spending in relation to GDP to more than 5%.

I can go on enumerating the benefits of the 10-point socioeconomic agenda, but the bottom line is that JICA understands the role and the importance of this initiative in achieving sustainable and inclusive growth.

 

To what extent does the economic growth of the Philippines benefit all levels of Filipino society and how is JICA contributing in this matter?

For the last several years, the Philippines has been enjoying high growth rates. President Duterte and Sec. Carlos Dominguez clearly mentioned that two things must be pursued: high growth and lower poverty incidence. JICA would like to support these endeavours.

JICA supports the Philippines through three pillars: (1) achieving sustainable economic growth through promotion of investment, (2) overcoming vulnerability and stabilizing bases for human life and production activity, and (3) peace and development in Mindanao. We believe that by pursuing initiatives in these areas, JICA can significantly provide support in attaining high growth and reduced poverty incidence.

For the first area, we have been supporting mainly transport infrastructure to achieve and maintain higher growth. As to the second area, the majority of the people under the poverty line are living in rural areas. In this regard, JICA supports the agriculture sector as well as the health and education sectors to help create jobs and promote a better quality of life for all. Lastly for the third area, it is important to note that poverty incidence is high in the Mindanao area. Thus, supporting this area allows us to address and improve the poverty conditions up to a certain extent.

 

In your opinion, what is the competitive advantage of Japanese ODA or FDI in the Philippines in terms of quality development of infrastructure?

One of the strengths of our ODA, as you may know, is that for many years Japan also was a recipient of ODA.  JICA accumulated the know-how especially in identifying our priority fields in where to put the money. Japan’s bullet train, Shinkansen, and some of the highways were financed by the World Bank. Only in the early 1990s was Japan able to repay all its loans from the World Bank. Thus, the strength is that Japan understands our clients’ situation and needs of reconstruction, development, and rapid economic growth.

The support or aid that we provide to the Philippines is based on our Japanese experience of high economic growth. Moreover, the technology or the know-how of the Japanese companies is transferred when providing ODA. A specific example is the resilient structures against the natural disasters like earthquakes. Japanese infrastructure such as highways, railways, roads, and bridges are made to be resistant to earthquakes and other natural disasters. In addition, we are supporting many of the railway projects here in the Philippines while introducing many safety considerations. As you may have noticed, Japanese railway systems are known to be one of the safest and the most punctual in the world. We ought to bring that to the Philippines—safe, quality infrastructure in general. That is the advantage of Japanese ODA and firms.

 

Following the contributions of Japan to the Philippines, what are the differences between the assistance offered by to other countries like Malaysia and Vietnam? Moreover, what do you think makes the Philippines interesting to Japanese investors—both in terms of ODA and FDI?

For ODA, there are very limited differences to note in terms of aid given to (for example) Vietnam and the Philippines. The most distinct characteristic our support provided to the Philippines is the one specifically devoted for peace and development in Mindanao. This is very important given that the island is under the martial law, not to mention that Mindanao also has a lot of growth potential. Mindanao has natural, mining, and fishery resources. The land is also very fertile and has a geographic advantage shielding it from typhoons. Being able to maintain peace and foster development could help maximize these potentials, reduce poverty, and ultimately contribute positively to the Philippine economy.

Another reason why we focus in this aspect is that security In Mindanao has effect to the regional security and stability. Politically and economically, this situation has an impact not only in the Philippines but in the whole region, therefore to develop and upgrade the safety conditions there is for the utmost benefit of all.

 

While JICA’s operations in the Philippines started only in the ‘60s, the road to friendship through Japan official development assistance began in 1954 when Japan joined the Colombo Plan. As Japan's economy strengthened in the 1970s and became one of the world's leading industrialized nations, its role as a source of development aiding many developing countries likewise grew. In 1989, Japan became the world's top donor nation. Three years ago, JICA celebrated the 60th anniversary of the Japanese ODA. In your words what would be the projects that cemented the good reputation of your agency in the country?

For the last 60 years, JICA has been supporting numerous projects and it is rather difficult to limit it to three milestones. We view all these projects as equally important. But to enumerate the strengths that we have honed in the Philippines for the last six decades, JICA implements both hard and soft components—the former referring to infrastructure such as railway, flood control, and other socio-economic infrastructures, while the latter refers to operation capacity development to train the government how to operate, maintain, and utilize the hard infrastructures.

Some concrete examples are the support given for the establishment of research institutes, joint activities with universities, and even scholarships to deserving individuals. Therefore, being able to improve both hard and soft components of the Philippine economy is something that strengthens the reputation of JICA in the country.

Moreover, when JICA supports a particular project it is not limited to the mere construction aspect. The agency also supports the masterplan, feasibility study, and the construction. Although this may require a longer period of time, the process ensures quality, viability, and success of the project. It will further result in a construction that is founded on sound project capacity and management plan.

 

In recent years, the Japanese government is strengthening the role of JICA as a partner for Japanese SMEs overseas. In the Metro Manila infrastructure megaprojects, there are many Japanese private partners collaborating with local ones. How does JICA work related to this matter?

As a matter of fact, we know that Japan has an aging society. This results in numerous Japanese companies having to go outside Japan to find an external market. Some of these companies, mostly SMEs, are not very experienced in global market. Through the government’s support for JICA and its role in SME development, we hope to be a platform for more of these firms to test their technologies or products in developing countries. In the duration of this testing period, we usually provide grants and financial support to cover the expenses incurred in bringing the product here. After which, they can decide whether or not they will operate in the Philippine market.

 

In connection with the efforts to adapt to the Philippine market, how important is the designation of economic zones to Japanese firms to manufacture their products? Moreover, what is the role of JICA in these economic zones?

Many of the Japanese companies operating in the Philippines are enjoying the benefits from the Philippine Economic Zone Authority. Therefore, the designation of economic zones has a significant impact on the businesses operated by the Japanese. It is somewhat safe to say that when Japanese companies enter the Philippine market, there is preference to establish inside the economic zones.

 

The Infrastructure Roadmap of Metro Manila by JICA is considered the best plan to address and solve the Metro Manila congestion and infrastructure problems. Currently, there are numerous infrastructure projects going on. In this context, could you elaborate on the progress of the Metro Manila Transport Infrastructure Roadmap?

We completed the Roadmap for Transportation Infrastructure Development in 2014. The idea is that instead of having one monocentric city, we are proposing for polycentric development so that growth will not just be concentrated within the center. 

Currently, the masterplan is being updated. Three years have passed since the roadmap was approved by NEDA, thus there is a need to update it, and we hope to be ready by November of this year.

Under this roadmap, various projects are supported by JICA. One of which would be the 40-km commuter railway from Tutuban, Manila to Malolos, Bulacan. Another project is the first subway in the Philippines, for which we are undertaking a feasibility study. We hope to have the feasibility study substantially finished by September. So far, based on the feasibility study, JICA stands fully supportive of the project.

 

One of the specific JICA transport infrastructure projects is the Bohol airport. The winning bidder of the construction project is the joint venture of companies Chiyoda and Mitsubishi. What is the expertise that Japanese companies, such as those granted the Bohol Airport project, could bring to the Philippines?

The expertise that Japanese companies could bring to the Philippines in terms of infrastructure are (1) reliability and sound technology, (2) safety practices both during the construction and the operation of the infrastructure, and (3) designs that are friendly to the environment and diverse users of the infrastructure. These are generally what Japanese investors or firms could bring to the Philippines with the hope of not just doing business but also improving the local economic conditions.

 

In many instances, infrastructure projects follow the PPP or the private-public partnership scheme in where a Japanese corporation works with a Filipino counterpart. Considering the PPP scheme, what do you think is its added value to the Philippines?

Considering it as a joint venture between Japan and the Philippines, I believe it is likewise a complementary relationship. For the Philippine companies, they contribute using their knowledge of the local society, politics, and natural conditions. Meanwhile, the Japanese companies contribute by adding advanced and reliable technology and transferring the know-how related to the infrastructure sector. In the case of the Bohol Airport, Japanese companies are partnering with local sub-contractors and is an example of a complementary relationship. As you can see, both countries offer something different making it complementary since one can provide what the other lacks. These joint ventures are then very beneficial and could result in better project outputs.

 

Representing JICA in the Philippines, from your perspective, what makes this time the best moment to invest in the Philippines as compared to other ASEAN countries?

One of the advantages is the high level of complementarities between the two countries. Japan has an aging society while the Philippines has a very young population. Moreover, the economy has been steadily growing during recent years. There are also a lot of people that could make a good market base for Japanese companies since the population reaches up to a hundred million.

Another advantage of the Philippines is its strategic location. It could be considered the centre of the ASEAN being close to many countries such as Japan.

In terms of skills, the Filipinos are very well-known for being fluent in English. They are also very able individuals or workers. There are actually a lot of Japanese companies investing in the Philippines not only for the Philippine market operation, but also for their global operations. As you may have already observed, there are Japanese companies who prefer to hire Filipinos for their operation and maintenance of their businesses outside the Philippines—be it in the Middle East or the America. This shows how capable Filipino people are.

 

Finally, what would be your message to Japanese companies that are interested in investing into the Philippines?

First of all, I would like to mention that the Philippines is a great country with a growing economy.  The people are also very nice and able workers. I really hope that more Japanese companies will be interested in working and investing in the Philippines.

Given the growth potential of the Philippines, prioritizing infrastructure would attract more foreign investors into the country. Now that the Philippine government is advocating for the ‘golden age of infrastructure,’ we’re optimistic that it’s also a ‘golden time for investments.’

In this light, JICA is not only interested in supporting infrastructure development in the Philippines but also in supporting companies interested in investing in the country, regardless of company size. Since we have been working in the Philippines for half a century, JICA has built an extensive network in the country, which interested investors or companies could use for their benefit.


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