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Japan firms shy away from Philippines

Publication Date : 29-11-2013

 

Japanese firms are reportedly taking a step back from their planned participation in the Philippine government’s public-private partnership program (PPP), deterred largely by the uncertainties in the country’s business and regulatory environment.

Takashi Ishigami, president of the Japanese Chamber of Commerce and Industry of the Philippines Inc. (JCCIPI) said the concern of Japanese firms regarding PPP projects stemmed from developments in the water concession agreements of Manila Water Co. Inc. and Maynilad Water Services, in which two Japanese firms, Mitsubishi Corp. and Marubeni, are respectively involved.

In a briefing on Thursday, Ishigami said that Japanese firms are currently on a “wait-and-see” stance as they await the Philippine government’s next move. Other Japanese firms, meanwhile, are heading over to Indonesia, Vietnam and Myanmar to invest and set up their respective offices and facilities.

“If the result of the arbitration is bad, then no Japanese company will step into the Philippine market for concession agreement. The government wants more PPP projects, but there is a big risk for foreign investors. The government wants us to spend more for PPP projects but we cannot [quantify] how much the risks are, and that is very important for the investors,” Ishigami said.

Last September, the Metropolitan Waterworks and Sewerage System issued a decision that mandated Manila Water to reduce water tariffs by 1.48 pesos per cubic metre per year for the next five years. It also ordered Maynilad to cut its rates as well by 0.29 pesos per cubic meter over the same period.

The new rates were supposed to take effect on October 1, but both companies went to arbitration, which meant that existing rates would apply pending the resolution of the case.

The European Chamber of Commerce of the Philippines earlier slammed the MWSS decision as it urged the government to honor the sanctity of contracts. It warned that uncertainties in the business environment—specifically the MWSS decision—are “breeding a huge trust deficit.”

“Government has to understand that ‘trust’ is the asset it has to have. It is precisely because of changing rules midstream that investors are more and more reluctant to invest long term,” ECCP vice president for external affairs Henry Schumacher earlier said.

“Who guarantees that the rules agreed with this administration will be honored by successive governments? Remember, PPPs (public-private projects) in infrastructure will last 25 years.”

US$1 = 43.66 pesos

 

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