Perhaps no other country is better suited than the ROC to help the Philippines strengthen this sector of its economy. And thanks to the direct interest and participation of ROC businessmen, such projects can remain in the private sector instead of being funded through the government or other centralized bureaucratic channels—a process that cuts red tape and reduces start-up time. As the following article indicates, there is rich potential for building further economic ties between the two countries.
The Republic of China on Taiwan may have outstripped the U.S. and Japan to become the largest source of foreign investment for the Philippines. Although the figures currently available on foreign investment in the Philippines are conflicting, there is no doubt that Taiwan is rapidly becoming a principal source. Over the vocal disapproval of Peking, the Aquino administration is forging ahead with its rewarding if unofficial relationship with the ROC.
Statistics recently published by the Philippine Board of Investment (BOI) showed that Taiwan was the largest investor in the Philippines in 1988. Later the BOI retracted this claim and placed Taiwan back in third position with 23.8 percent of 1988 investments, behind the U.S. (33 percent) and Japan (24 percent). The 1988 ROC dollar total was US$111.6 million, according to Philip pine investment officials. Although there seem to be as many different figures as there are sources on the ranking and size of ROC investment in the Philippines, they are all in this order of magnitude.
According to Mr. Edsel Custodio, the director of the Philippines' Asian Exchange Center in Taipei, Taiwan is the largest investor in terms of fresh money coming into the country, while the U.S. and Japan remain the largest investors because of the reinvestment of the earnings of large, long-established multinationals.
ROC officials and experts insist that they are still number one. The ROC's representative in Manila places ROC investment at 32 percent of the total, followed by America (25 percent) and Japan (20 percent).
Regardless of the confusion surrounding Philippine investment figures, one fact is certain: after 16 years in the political wilderness, Taiwan, by virtue of its economic might, can no longer be ignored. Of particular relevance to the Philippine government, Taiwan businessmen invested over US$3 billion in Southeast Asia in 1988 alone, over US$2 billion of which went to Thailand. The Philippines, with all its economic, political, and social problems, simply cannot afford to be left out.
In its ongoing effort to lure Taiwanese investment into the country, the Philippine government has quietly offered Taipei all the usual tax and investment incentives while stressing the geographical proximity of the islands, the presence of a large Fukienese-speaking Chinese population, and the lack of anti-Chinese sentiment encountered elsewhere in Southeast Asia. Since the two countries lack official diplomatic relations, trade and business relations are conducted through channels such as the Philippine Chamber of Commerce and Industry and the Philippine-Chinese Business Council and their Taipei counterparts (not to speak of even less official channels such as relatives or long-time business associates).
Aside from attracting substantial Taiwan investment into the Philippines, another area that can hardly have escaped the notice of economic planners is the future potential of Taiwan as a major market for Philippine goods. The ROC's affluent 20 million-strong population is rapidly evolving into a free-spending consumer society with huge purchasing power. Taiwan currently enjoys a large trade surplus with the Philippines. Financial analysts point out that in 1986 Taiwan was the third largest supplier of Philippine imports. Yet the Philippine share of the Taiwan market in the same year amounted to a mere 0.5 percent, the lowest of all ASEAN nations, and there has been no improvement since then.
Geographical proximity, abundant resources, a well-educated labor force, a large Chinese population, and the strength of the NT dollar all make the Philippines an attractive place to invest.
Predictably, the Philippine Board of Investment cites abundant natural resources and a well-educated labor force as the principle attractions for drawing ROC investment into the Philippines. More realistically, it is the 40 percent appreciation of the New Taiwan dollar (NT$), local labor problems, and growing protectionist measures against Taiwan's exports in the U.S. that have led many manufacturers in the ROC to relocate overseas. With Thailand and the Philippines targeted as their chief overseas investment priorities, ROC manufacturers hope to take advantage of cheap labor and resources while avoiding U.S. import quotas on goods from Taiwan.
ROC projects are most often small, labor-intensive, low-technology ventures requiring a limited amount of investment per project. Of the 69 ROC projects approved by the BOI in 1988, the total amount of investment came to about US$107 million, a large share of which was earmarked for a naphtha cracking plant in Batangas province in which the Philippine BOI owns a 10 percent interest. BOI official Eloisa Atienza-Lim said that the BOI was "particularly excited" about the plant as it would create 3,500 new jobs, produce foreign exchange earnings of nearly US$49 million a year, and bring in 37 downstream industries. Investments in petrochemicals represent 85 percent of Taiwan's overall investment in the Philippines.
With regard to the inflow of both legal and sub-rosa low-capital-intensity manufacturing industries from Taiwan, Atienza-Lim maintains that the BOI is unperturbed since the introduction of labor-intensive industries is seen as a method of soaking up large pools of unemployed workers.
Among the favorable factors for investment is the recent lifting of ROC government restrictions on overseas investments by companies with a capital of less than US$350,000. In addition, there is a proposed Philippine bill (Bill 420) to allow small companies hiring fewer than 20 employees to come into the country. If passed, it is sure to speed up the steady flow of small manufacturers from Taiwan eagerly relocating in the Philippines. Officials further indicate that the Philippines will also benefit from the ROC's extensive technical experience in agriculture and aquaculture.
Given the complementary nature of their economic needs, investment and trade relations between the ROC and the Philippines should continue to grow vigorously as long as economic relations can be conducted in a relatively stable political environment.