Foreign direct investment

PH FDI net inflow lags behind; total FDI grows in 2013

A struggling Philippines. Will the country continue to be behind its neighbors, or finally regain its economic power back? (Image from http://zamoracartoons.blogspot.com/2011/03/quo-vadis-philippine-economy.html)

The Philippines’ foreign direct investments (FDI) net inflow is still struggling behind its neighbors in Southeast Asia in the past few years.

The total foreign direct investments net inflow reached to $1.262 million dollars, a decrease from $1.298 in 2010 and $1.963 in 2011, statistics from the Association of Southeast Asian Nations (ASEAN) Secretariat showed.

Singapore has the highest worth of net inflow, amounting to $63, 997.2 million dollars, fifty times greater than the Philippines’ net inflow. On the other hand, Indonesia’s net inflow was fifteen times greater at $19, 241.6 million dollars in 2011.

The Philippines ranked sixth in the countries with large foreign direct investments, ahead only of Brunei, Laos, and Cambodia. Myanmar’s net inflow was not available as of publication time. Thailand and Vietnam’s net were greater, amounting to $7.778 million and $7.430 million respectively in 2011.

Philippines’ net inflow was declining: from 2009, the net inflow amounted to $1,963 million to $1,298 million in 2010 and $1,262 million in 2011. Singapore has been consistent in its net inflow, maintaining the highest from 2009 to 2011.

Extra-ASEAN inflows are higher than Intra-ASEAN in all countries from 2009 to 2011.

Extra-ASEAN inflows are higher than Intra-ASEAN in all countries from 2009 to 2011. (PDF to Image from http://www.asean.org/resources/2012-02-10-08-47-55/asean-statistics)

The European Union (EU) continued to be the non-ASEAN top foreign direct inflow investor for three years at $43.315 million. This was also followed by non-ASEAN countries: Japan, United States of America, China, Hong Kong, Cayman Islands, Republic of Korea, Taiwan, and United Arab Emirates.

The total net inflow of the top ten sources from 2009 to 2011 amounted to $187, 753.3 million.

Foreign direct investment inflow to ASEAN from 2009-2011. Infographic made by Clara Angela R. Murallos (https://infogr.am/Foreign-direct-investments-net-inflow-intra–and-extra-ASEAN/)

Total foreign direct investment in 2013

Despite the low net inflow of foreign investments in the Philippines from 2009 to 2011, the country is showing a positive growth in terms of total foreign direct investments in 2013.

In a press release of the Philippine National Statistical Coordination Board (NCSB), the total approved foreign investments surged by 159.6% in the second quarter of 2013.

Total approved foreign investments in 2012 and 2013. Infographic by Clara Angela R. Murallos

The total foreign investments (FI) amounted to 58.8 billion pesos, 159.6% higher than 22.7 billion pesos in the same period last year. In the first semester of 2013, foreign investments reached 93.4 billion pesos, higher than 129.6% from the amount recorded last year at 41.2 billion pesos.

Top countries that invested for the second quarter of 2013 are the United States, Japan, and the Netherlands. United States topped the investment list 43 billion pesos or 73.4% share during the quarter. Japan and Netherlands followed, garnering 4.2 billion pesos and 3.8 billion pesos or 7.2% and 6.5% of the total approved FI, respectively during the quarter.

Electricity, gas, steam and air conditioning industries were the top contributors of foreign investments. The investment amounted to 43.3 billion or 73.7% of the total FI during the quarter. Manufacturing came next at 7 billion pesos, or 11.8%, followed by administrative and support service activities, which amounted for 5.2% of 3.1 billion pesos.

The second quarter of 2013 are expected to generate 41, 845 jobs, an increase of 25.4% from last year’s projected employment of 33, 381 jobs in the same period. Out of these expected jobs, 79.1% would come from projects with foreign interest, the press release said.

‘An emerging economy’

When asked on what the numbers represent on the ASEAN’s foreign direct investment net inflows, Economics Coordinator Emmanuel Lopez said that the ASEAN nations are doing well.

“It’s doing well because presently it’s thought that the ASEAN nations are the melting pot of investments because of the United States and the Western economy. Right now, it’s not doing well because of recession and other economic indicators,” Lopez said.

“So there is an exodus investment from a previously developed funding—an emerging economy like Southeast Asia nation. As a matter of fact, not only the Southeast Asia but the whole Asia as well,” he added.

Lopez said that the problems faced by America and Europe were a “blessing in disguise.” He said that if not for these problems, the economy will not grow.

“Our economy is emerging because of the transfer of investment from United States towards Asia,” he said.

European Union more stable than American Economy

Lopez explained that the European Union’s economy is more stable than America because the European Union has a bigger number of investors.

“The European Union is more stable than the American Economy. This has been going for quite some time now. Although the European Union became unstable, its economy is still stronger than America.”

Lopez added that the European Union continued to be the top investor in Asia despite the world crisis.

Factors in investing in the Philippines

Lopez said that the most important factor that urges investors is political stability.

“Prior to the expose of the pork barrel scam, Aquino’s perception towards ‘daan na matuwid’ was straightforward. Political stability is the most important factor,” the Economics professor said.

Ian Jones, a British businessman who is a director of Joannian Taxi Inc for ten years, said that in maintaining investments, stable environment is needed to keep foreign investors.

He added that cheap labor and an educated workforce are factors that affect foreign investments in the Philippines.

“You can make investments despite you have recession, what matters are the policies and rules won’t change,” he said.

When asked if the 7.8% Gross Domestic Product (GDP) growth will affect investments, Jones said that “economic growth will generate more opportunities but not a reason to invest.”

“The Philippines is accommodating when it comes to certain foreign investors. Some economic sectors are rigged. Examples are the cigarette and alcohol industry,” Jones said.

Foreign investments in the Philippines are a laborious process, the businessman said.

“There are many requirements, unlike other countries wherein you can finish the task online and in one day. Setting up a company in the Philippines is tiresome. There are barriers from having foreign direct investments,” he said.

He cited that the Philippines has rigid protection policies.

“Foreign competitors are priced out of the competition. The government makes the policy rules—that’s why foreign competitors become uncompetitive.”

“What’s weird in the Philippines is that when investors invest capital, the government is already charging capital tax unlike other countries,” he lamented.

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