There goes Ford

Today's op-ed by Prof. Sicat:

Ford Motor Co. recently announced that it will close its manufacturing plant in Sta. Rosa, Laguna at the end of the year. This comes at a time when signs are looking up for the Philippine economy’s near term future. 

It is a business decision, the announcement says. It is part of a restructuring decision of the whole Ford Motor Co. international operations... 

Ford’s Philippine presence is even smaller and marginal. From the viewpoint of the entire Ford Motor Co., it is essentially a footloose operation that headquarters could cut off easily The plant has an employment of only 450 workers... 

Any investment closure by a name brand which has salutary advertising impact for the country invites questions about the investment climate. Even in a time of improving expectations, it is an event not to be ignored. 

Philippine policy-makers who want to strengthen the inflow of investments in manufacturing and industry should heed lessons that our neighbors offer to us. The problem has been structural for the Philippines for decades. To them, their experience has been a breeze in getting foreign FDI to come in. We have to make headway in reforming the policy problems. 

When it began to industrialize, Thailand had very liberal encouragement for foreign direct investments. We were actually ahead of Thailand, nay, ahead of any major country in ASEAN in the promotion of industrialization. We were confident but we stuck to our policies of qualified entry of foreign investments because of the constitutional restrictions... 

Another way of saying this is that they devised national policies that were simpler, leveling the playing field for all investors so that foreign investors were almost on the same footing as those for their own nationals. Foreign investors found it easier to set up businesses. 

The result was continuous influx of FDIs. That cumulation of FDIs over time created a large base of manufacturing operations in industry over a wide area of the economy. When big industrial investors came into the country, supplier companies of those large foreign companies followed suit. 

As the manufacturing industries deepened, the domestic supply chain in industry became more diversified. This is one reason why the export industries from industry have been able to have a larger impact on domestic economic procession.