Investor fatigue?

By ATTY. DODO DULAY

The news that Ford Philippines will be closing its car manufacturing plant in Santa Rosa, Laguna, at the end of the year has undoubtedly put a damper on the Aquino administration’s efforts to attract foreign investors to the country.

Ford says the lack of supply base and economies of scale convinced them to stop operations in the country. Stripped of technical gibberish, it simply means the American carmaker can no longer manufacture and export vehicles at competitive prices. It will be cheaper – and therefore, more profitable – for Ford to manufacture cars elsewhere. Whether that’s due to the increasing cost of doing business in the country caused by rising power rates and importation costs, or the competition from cheaper Japanese automakers relying on cheaper imported parts and components, Ford did not elaborate.

Not surprisingly, administration officials were quick to downplay Ford’s pull-out saying the carmaker’s business model was not viable in the first place because it chose to go big on exporting vehicles before fully developing the local market. DTI officials even chided the American automaker for supposedly failing to see the potential of the country’s automotive industry and fulfilling the “efficiencies and market share.”

What the Aquino administration seemingly ignores is that Ford is the only volume exporter of completely built units. And when Ford shuts downs its factory in December, there will no longer be any participant in the country’s car export program since Ford is currently the lone participant in the program. The country also stands to lose $1 billion a year in exports which Ford was able to generate from shipments to our Asian neighbors, Thailand, Malaysia and Indonesia over the past several years. Another big loser from Ford’s pull-out will be the 250 skilled Filipino workers, their workers, and other Filipino businesses and their workers who are dependent on the American carmaker.

Ford’s pull-out will definitely be a setback to President Aquino’s dream “to get manufacturing back in the country.” And instead of foreign investors “lining up” to set up or expand their businesses in the country, as the Palace boasted before, it seems they’re heading out the door.

That’s apparently what General Mills, Inc. – the American Fortune 500 corporation known as one of the world’s largest food companies – also did. Last month, the local distribution arm of General Mills decided to leave the country, halting the sale of its famous Häagen-Dazs, Gold Medal, Green Giant, Nature Valley, Pillsbury, and Betty Crocker food brands beginning September 1.

According to a statement made by its local subsidiary, “General Mills’ business in the Philippines has been consistently challenging in all the 12 years that we’ve operated here.”

“We simply can no longer sustain our business in the increasingly challenging environment we face,” the company added without elaborating.

Those definitely aren’t the words of a happy investor. Aside from being pregnant with meaning, the phrase “challenging environment” certainly doesn’t inspire investor confidence in the country’s business climate.

It therefore isn’t surprising that General Mills’ pull-out has been attributed to a corrupt bureaucracy. A news report said the real reason the American food giant left the country was because it could no longer tolerate a corrupt Bureau of Customs official it had to deal with when importing its goods. General Mills supposedly decided to simply forget the Philippine market rather than haggle over tariffs to pay in order to get their stocks past Customs.

Of course, that earned a quick riposte from Customs Commissioner Ruffy Biazon who even posted in his blog, the curt reply from General Mills’ brand manager that the news item was “inaccurate” after he asked them whether corruption in the Bureau was the “sole” reason for General Mills’ pullout. That’s well and good. But “inaccurate” doesn’t necessarily mean the news item was totally untrue or that it was the only reason for the food giant taking flight. Neither did General Mills flatly deny that bribery or corruption does happen at the customs bureau.

Whatever the real score is, it’s clear is that it will take more than picture-perfect roadmaps or growth potential statistics to attract and keep foreign investors in the country. The bottom line is the government should make it profitable for business to operate in the country – a view echoed by Ford when it admitted that its concern was to be “able to produce at a level which will bring in profits for our shareholders.” That can only happen if the government lowers the costs of doing business vis-à-vis our Asian neighbors by leveling the playing field, lowering electricity rates, building and improving infrastructure, cutting down red tape in government agencies and local governments, and educating and training our workforce to meet the demands of market.