PHL credibility with foreign investors needs cost reduction, charter reform

By Katherine K. Chan, Reporter THE PHILIPPINES needs to build credibility with foreign investors’ reforms by bringing down the cost of doing business and pursuing legal reforms at the constitutional level, a senior lawyer said. Russell Stanley Q. Geronimo, founder and managing lawyer of Geronimo Law, said legal reforms pursued so far have proved insufficient in addressing the clouded foreign investment climate. Strengthening credibility, he noted, entails improving the judicial system and ease of doing business by lowering associated costs. “The Philippines stopped at the easy half of liberalization,” Mr. Geronimo said in a commentary. “The hard half is constitutional revision of the economic provisions. It includes judicial reform so that courts resolve commercial disputes in months rather than decades. It entails lowering the cost of doing business rather than introducing more incentives, and ratification of the trade and investment treaties that give foreign capital external enforcement when domestic institutions wobble,” he added. Since late last year, foreign direct investment (FDI) has slumped in the wake of the controversial flood control corruption scandal. Willingness to risk capital on overseas ventures was also hampered by the fighting in the Middle East. In May, FDI net inflows plunged to their lowest in more than 11 years to $210 million in May, down 64.7% year on year and by 16% from the previous month. This was the second straight month that inflows fell year on year. May’s FDI tally brought the five-month total to a net inflow of $2.178 billion, 33.4% lower. According to the central bank, most of the foreign investments flowed from Japan, the US, and Singapore, and were channeled mostly into manufacturing, financial and insurance, and real estate ventures. Mr. Geronimo said the government’s principal mistake was assuming legal reforms by themselves would translate to investor confidence. “A foreign company may now own 100% of a Philippine railway, but it must still buy some of the most expensive electricity in Asia, move goods through congested ports at logistics costs far above regional norms, and hire from a labor market whose best engineers are already in Singapore or Riyadh,” he said. “Liberalization removed the legal barriers but left the cost of doing business untouched.” It likewise fell short of executing its legal reforms, citing the delayed release of the implementing rules of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act, Mr. Geronimo noted. “The Philippines has spent four years perfecting its incentives, and the central bank’s dismal monthly figures show what that earned,” he said. “It should now invest in credibility, which costs more and takes longer, but is what investors have been looking for all along.” For 2026, the central bank sees FDI net inflows declining to $7 billion from the estimated $7.8 billion in 2025.