Pagulayan, Gionico L.

Laws on Investment in the Philippines

#10

Investment plays an importan and vital factor in the economy, particularly

economic growth. Investment means an increase in capital spending. Being as
such it is considered to be a component of Aggregate Demand, and if there is an
increase in aggregate demand this will boost the economic growth. Investment
likewise has a significant factor in the economy for it it contributes to current
demand

of

capital

goods,

thus

it

increases

domestic

expenditure;

it enlarges the production base (installed capital), increasing production capacity;

it modernizes production processes, improving cost effectiveness; it reduces the
labour needs per unit of output, thus potentially producing higher productivity and
lower employment; it allows for the production of new and improved products,
increasing value added in production; it incorporates international world-class
innovations and quality standards, briging the gap with more advanced countries
and helping exports and an active participation to international trade.
The Philippine economy current state by virtue of Investment has grown by
about five percent a year on average over the last ten years, significantly higher
than in the previous two decades. This became possible by virtue of the new laws
encated by the current administration as well as new treaties or international
agreement entered into by the said administration in relation to investment. Other
factors that makes the Philippine economy a place for a robust investment climate
is by reason of a large market, skilled human capital, youthful population, and
strategic location that connects population centers across Asia, as well as being
increasingly and continuously open to international trade.
Nevertheless, in spite of the continuing economic growth that the
Philippines is experiencing, Filipinos below poverty line also increases. Moreover,
there are also other factors in which the Philippines must face to maintain and
sutain the rapid economic growth that it currently experiencing, and to ensure it,
the country must procure more investment in the country. However,such task or
obligation of the governemnt is a problem due to some current conditions of the

laws that imposes to investment that for such reason foreign investor are
discouraged to enter into investment in the Philippines as well as the current
condition of the Philippines itself. These flaws are; legal restrictions, regulatory
inconsistency, and a lack of transparency hinder foreign investment. In many
sectors of the economy, GPH regulatory authority remains ambiguous, and
corruption is a significant factor. In addition, a complex and slow judicial system
inhibits the timely and fair resolution of commercial disputes.
One of the basic reason why the foreign investors are discouraged to invest
in the Philippines is because of the regulation imposed by the government to both
domestic and foreign corporation in investing. There are many registration to be
made as well as fees to be made, including those superflous requirement that the
laws requires before an individual or a corporation can invest. Moreover, due to
this reasons inconsistency in the processes arises, whereby for some in order to
escape such dillema tend to pay the governemt for an easier process which leads
to curruption, which is again one of the reason why investors are discouraged to
invest. Hence to fix or to solve this problem, the government must enact a law
that will make the process of investing in the Philippines easier for the investor in
a way that is not burdensome to them. By virtue of it, corruption will be prevented
and a shorter period for a business start up can happen.
Another reason is the high tax rate that the Philippine government is
imposing to the investors. Maybe for the foreign investors due to tax incentives
that some laws provides in favor of them to encourage more foreign investors, for
the domestic investor this is encumbersome on their part, primarily because of
instead of reaping the fruits of their investment almost majority will be paid to
higher tax rate that the law imposes. Hence, if a tax incentives can be made in
favor of the foreign investors, why can the governement unable to provide the
same incentives to domestic corporation for the very basic reason that both of
them are the same investors who in the end contributes to economic grwoth of
the Philippines. Therefore, as a remedy to it the government should enact a law
providing a tax rate and incentives to both foreign and domestic corporation that

is very reasonable to both of them, that will enable to operate freely wihout
minding the payment of tax as a burden.
In conclusion therefore, there are many factors and things that Philippine
government must do to ensure and maintain its continuing economic growth, and
one way is by ensuring investments in the country. However, due to some reasons
they are conditions or dillemas in the current status in the Philippines that
discourgaed investment in the counrty. In my own and humble opinion some
solution such as providing an easier and not a rigid a process of investing should
be made, as well as providing for a more reasonale tax rate and incentives that
will cater the needs of the investors. In such ways, the Philippine can ensure that
it will be able to attract more investors and to invest in the Philippines.