COVID-19 has overwhelmed the Philippines’ healthcare system and economy. What started as a public health crisis has quickly evolved into an economic disaster with the Philippines entering a technical recession in the second quarter of 2020. For the first time in four decades, the Philippine economy contracted by 16.5%, its lowest quarterly growth recorded since 1981. While the country’s economic performance at the end of 2019 was promising, it rapidly deteriorated in 2020 and the fate of the economy now seems uncertain.
In just five months, the country has been in and out of varying levels of lockdowns meant to contain the transmission of the Wuhan virus. However, the rising number of positive cases in the country has disrupted any plans of further opening up the economy. Overseas Filipino Workers have also begun to return in droves as a result of the virus’ impact on global labor markets.
With the contraction of the country’s traditional economic growth drivers – consumer spending, remittances, industries, and services – it must turn to investment lead growth if the economy is to recover. An influx of such investments will unleash a sustainable domino effect that provides a stable source of income to the people, boosting consumption, and eventually helping businesses get back on their feet.
However, to attract favorable long-term investments, the country must have a stable business and policy environment for investors. In this regard, good governance the rule of law are essential in attracting foreign investment. It instills confidence when all stakeholders, especially government officials, adhere to investment rules and uphold the sanctity of contracts and other agreements.
On the other hand, if a national government is seen to be ‘weaponizing’ the law against its opponents and its people’s basic rights, this will scare investors away. It also raises red flags when a national leader threatens the closure or take-over of businesses over politics. And when a government constantly changes its rules, is distracted with unnecessary political issues, deviates from the urgent needs of society, and lacks predictability, transparency, and accountability, it shakes the confidence of investors as well.
Economic growth and recovery are not only about having sound economic policies in place. Good governance and adherence to the rule of law are also essential to attracting and keeping legitimate and long term investments.
Prof. Dindo Manhit
CEO and Managing Director, Stratbase Group