Red tape poses challenge for foreign investors, says German ambassador

Bureaucratic red tape and foreign ownership restrictions remain some of the challenges facing foreign investors in the Philippines, Germany’s ambassador to the Philippine said on Tuesday.

German Ambassador to the Philippines Andreas Michael Pfaffernoschke told reporters on Tuesday that foreign businesses still face hurdles in terms of securing permits, especially at the local level.

“There are many permits you need in the Philippines; there is sometimes corruption involved, and there are different layers of government units that are involved in getting permits,” he said.

“So, making these things easier, streamlining the processes, and reducing red tape are definitely among the key concerns.”

Mr. Pfaffernoschke said issues involving red tape are not just a concern of German businesses, but of the broader business community.

“When it comes to red tape… it’s the number of permits you need, it’s the time it takes to get a permit… I think it’s not unique to German businesses, you will hear this from the whole business community in the Philippines,” he said. 

David Klebbs, economic counselor of the German Embassy, said that the typical obstacles faced by German businesses doing business in the Philippines involve bureaucracy.

“It’s sometimes not easy to get the right permissions; there are different levels, local government units, and (other) different things,” Mr. Klebbs said.

While some German businesses may say that doing business in the Philippines is easier, he noted most still say that it is difficult.

“Most businesses say (that) they feel it’s difficult. They feel it’s not so easy to understand what’s happening. So it really helps to have certain things. What usually helps is a one-stop shop, which is also being done already by the Filipino government,” he said.

Mr. Klebbs said the government should try to make the permits processing “as easy and transparent as possible.”

The Philippines may look into lifting the foreign restrictions on ownership and procurement, which may lead help attract more investments, he said.

“If you look, for example, at the Procurement Law, it is one of the magical tools that the country has to be open to foreign investors … In the end, you can get many offers if you do it well, and you can choose the best provider,” Mr. Klebbs said.

“There are companies that started on the procurement contracts in the Philippines and were not in the Philippines before, and now they’re very successful,” he added.

He said that the procurement law should be more open and procurement procedures should be less complicated and time-consuming.

“Same as foreign ownership. It is really difficult for foreign companies to do business if they’re not able to own their businesses,” he said. “Also with the ownership of land. Sometimes you need land to do business. If you can’t own the land, you can’t do the business because it’s too risky.”

“But we think that it is better to allow it. But I do understand this notion that certain things should stay for the people, but it’s a balanced approach,” he added.

The House of Representatives has already approved Resolution of Both Houses (RBH) No. 7, which seeks to amend the restrictive economic provisions of the Constitution.

Under Article 12 of the Constitution, foreign ownership of land and businesses is only limited to 40%.

Germany was the top source of foreign-approved investments in the Philippines last year, accounting for PHP 393.99 billion, and among the leading sources of foreign direct investments, contributing USD 149.89 million.

Data from the Philippine Statistics Authority showed that total trade between the Philippines and Germany was valued at USD 4.65 billion in 2023. — By Justine Irish D. Tabile, Reporter