Teresa Gene V.

Dakis International Political Economy

AB Foreign Service / FS302 Sir. Jumel G. Estrañero

Foreign Direct Investment in the Philippines

First is what is Foreign Direct Investment? Is an investment made by a company or

individual from a certain country, to another country, in order to acquire either ownership or
controlling interest. The amount of foreign direct investments (FDIs) coming into the
Philippines last October hit its highest level in 16 months, suggesting positive investor sentiment
over the country's strong macroeconomic fundamentals and growth prospects. Latest data from
the Bangko Sentral ng Pilipinas (BSP) released on Wednesday, January 10, showed net FDI
inflows reached $2.02 billion in October 2017, which was $1.35 billion higher than the $670
million in October 2016. This was the biggest monthly inflow since April 2016, a period when
the Philippines recorded $2.24 billion in FDIs. The April 2016 FDI was pumped by the P37-
billion partnership deal between Bank of Tokyo-Mitsubishi UFJ and Security Bank Corporation.
Data showed equity placements jumped to $1.59 billion last October from $84 million in the
same month in 2016, helping the local bourse reach a new record high. (Rappler,2017)

The FDI help a state by improving capital flows, this makes more resources available for
the state. Next is Technology Transfer, Foreign investors can provides the state with the
technology in order for the state to grow/evolve. Regional Development means that the
improvement of a region is quicken. After that, Increased competition that benefits the economy.
Next is Favorable balance of payments, summarizing all transaction of a country’s investment
and may be of the country’s favor. Increased employment opportunities. This gives people
opportunities to get employment on the invested countries company. There are pros and cons.
The cons are; Low levels of research and development. Risk of increase capital outflows, during
the partnership to the other country. Capital may leak. Next is Stifling of domestic competition
and entrepreneurship. Erosion of host culture. Disruption of domestic business practices. Risk of
interference by foreign governments.

Aside from Singapore, Japan, the Netherlands, the United States and Luxembourg as the
origin/source of equity capital infusions, UK can be the source of the Philippines. UK leads
Europe in investments in the country. The Philippines may acquire infrastructure, social
development (education and health), digital economy and capital markets development. That’s
the reason why UK can be in direct economic cooperation in the PH.

There are challenges that Philippines can encounter in the FDI stability and instability.
The first challenge is Graft and corruption, having a corrupt government can never help a
country grow because resources don’t go to the state. It goes to the pockets of the corrupt
government. Second Ineffective judicial system, having this may slow down the resolving of
commercial disputes. Third the Limited Ownership, the Philippines has restricted foreign
ownerships in selected industries. Fourth is Regulatory System, certain products have restrictions
on them so that might be a problem. Fifth is the VAT there is a 12 percent Value added tax when
buying foreign goods. Sixth Infrastructure, Overcapacity in International Airports nation wide
may hinder in development and tourism. Seventh Internet Penetration, Cyber Security is still a
problem in the PH. Eighth is Highly Priced Sensitive Markets, if you cant afford it you can’t
acquire it. That may hinder in development. Ninth Philippine Government Procurement, the RA
9184 has significant paperwork requirements, limits advance payment to a maximum of 15
percent, and only allows 90 percent payment upon delivery of goods. The remaining 10 percent
is withheld until after the warranty period is completed. Tenth Customs, specific products require
special licenses and permits prior to shipment. Last Tariff/Non-Tariff Barriers and Other Trade
Regulations.

For recommendations, first improve the technology and internet. Having latest tech and
a fast internet can help in communicating overseas. This can increase the GDP. And this will also
improve cyber security. Also Invest in Infrastructure. Having poor public infrastructure may turn
away investors. So investing in Infrastructure can attract more investors. It can be acquired
quickly and it does not have to impute pure profits. We also should prevent corruption. Due to
selfish government officials the country is suffering because of their greed. This is a hard task to
do. But the harder things are the more it is worth it when it Is finished. Reducing corporate tax
and aligning it with other Asian country also can help and last I think is have an effective judicial
System. In order for us to resolve commercial disputes fast, efficient and effective.