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Three
Kings..er Things
By Michael Alan Hamlin
August 27, 2001
Some may worry that the ongoing political pretentiousness
taking place at the Senate or the Congressional investigation into
collusion between the military and the Abu Sayyaf in Basilan are
further dismaying foreign investors. But the truth is that the Philippines
had so little chance of seducing significant levels of new foreign
investment that these latest shenanigans mean very little.
That doesn't mean there's nothing worth worrying about,
however, for those who are, at this point, still inclined to worry
for whatever reason (For most of us, government is so monumentally
irrelevant that there's just no reasonable payback for wringing
our hands over it.). But at least three things took place in the
last week or so that will give investors already here and considering
reinvesting (as opposed to considering moving their investments
to China), pause.
Reinvesting investors are a principal source of investment
for any country. Every time Intel's CEO Craig Barrett comes through
town to announce more reinvestment in the Philippines (most recently
another US$27 million on top of US$500 million already invested),
he notes that the company has been here through bad and worse, backing
me up on my claim of government irrelevancy and at the same time
acknowledging the considerable merits to being in the Philippines
(smart, productive people). Reinvestment in Hong Kong accounts for
60 percent of new investment according to officials there.
So there's nothing wrong with reinvestment. In fact,
there's a lot wrong with not having significant levels of reinvestment
for at least a couple of reasons. First, low reinvestment would
suggest that the original investment isn't paying off. Second, it
would suggest that government isn't paying attention to its most
profitable clients, its current investors, who are probably interested
- certainly more interested than anyone else at this point - in
reinvesting in the country. But of course that brings me back to
the irrelevancy of government, and we've already been there.
Okay. First off, Representative Robert Ace Barbers
this week sounded off against Mitsubishi Motors Corporation, accusing
it of connivance with a local firm, Alzen Enterprises, of defrauding
the government of around P600 million. In what's known as a privileged
speech, Mr. Barbers said, "This amount could have paved another
10,000 kilometers of roads, built an additional 20,000 classrooms,
or may even be enough to finance the operations of an entire municipality."
And maybe it could be used for a lot of other things, too.
Mr. Barbers announced that he was placing "Japan's
highly respected international organization - Mitsubishi Corporation
- in public scrutiny," and that the whole affair was terribly
embarrassing for both countries, let alone the target of his ire.
But as so often is the case in these cases, Mr. Barbers had his
facts wrong. The Mitsubishi he was referring to turned out not to
be Mitsubishi Motor's affiliate, Mitsubishi Motors Philippines Corporation
(MMPC), or a car manufacturer at all. Oh my.
Mr. Barbers may have been referring to trading firm
Mitsubishi Corporation, which is a separate and unrelated company
(MMPC is owned by Mitsubishi Motors Corporation and a trading firm
that competes with Mitsubishi Corporation, Nissho Iwai. But who
really knows? If Mr. Barbers can't tell the difference between a
car manufacturer and a trading firm, and isn't interested in finding
out before destroying a valued investors reputation, the integrity
of the rest of his argument becomes sorely tainted. As it deserves
to be.
The lesson is that any investor is fair game to any
legislator looking for a headline who thinks he has a story regardless
of whether he has the facts.
Let's move on. During the administration of Fidel V.
Ramos, the Subic Bay Metropolitan Authority (SBMA) awarded the right
to operate the Subic port to Hutchison Ports Philippines (HPP).
Mr. Ramos overturned that award for reasons that are far from clear.
HPP obtained an injunction that stopped the rebidding, but last
week the Supreme Court announced that ports are public utilities
and can't be operated by foreign corporations. Worse, it said that
as a foreign corporation HPP cannot seek compensation through the
courts because it doesn't have a license.
However, lawyers say that government has never considered
ports utilities, and that legislation on the matter is fuzzy, at
best. The bottom line for the foreign investor, however, is that
years after fairly winning a bid and beginning operations and long
before the investment is recouped the investor can be unceremoniously
thrown out of the country with no right to appeal. And that's not
a very appealing thought.
The third instance has to do with the long-standing
contest between a tiny, poorly run restaurant in Quezon City and
the Shangri-La Hotels. Once again, the Supreme Court has ruled that
the Shangri-La Restaurant is entitled to the name Shangri-La, and
that Asia's most respected homegrown hotel chain must use another
name in the Philippines.
It's true that the restaurant has the prior claim.
But if you visit it today, it's logo and marketing collateral are
obvious knockoffs of the Shangri-La Hotel logos. Clearly, the hotel
chain is not trying to capitalize on the reputation of the restaurant,
which doesn't have much of a reputation aside from this legal action.
And in terms of taxes legitimately paid, jobs generated, and international
prestige, the hotels are clearly more important to the Philippines'
interests.
While the restaurant should be compensated in a reasonable
manner, clearly a small and mostly inconsequential enterprise should
not be permitted to impede the operations of an investor who contributes
in a much more significant way to the development of the economy.
And this will be a significant impediment to other investors facing
similar challenges. The damage to corporate identity and branding
are just not worth the tradeoff.
Are any of these investors going to be reinvesting?
You tell me.
(Mr. Hamlin is managing director of the consultancy
TeamAsia and the author of three books on Asian economies and managing
in Asia. His latest book is Marketing Places Asia, which
is coauthored. His e-mail address is mahamlin@teamasia.com.ph.
If you use a Smart/Talk N Text GSM user, you can text a message
to Mr. Hamlin's mailbox by typing the keyword mikehamlin and sending
it to 200.)
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