Challenges in Sustaining Foreign Direct Investments

The Philippines has yet to unleash the potential of FDI.

Foreign investors choose to invest their money in countries other than their own due to a number of motives. Ms. Farida Adji of the International Finance Corporation says they seek out natural resources, markets, efficiency and strategic assets.

Currently, the Philippines is in a prime position to meet the needs of these investors as evidenced by the forty percent (40%) growth in foreign direct investments in 2016. There is even more growth to be had as the country’s circumstances pose as potential drivers.  Mr. Arjun Goswani of the Asian Development Bank notes some potential drivers are: young population, remittances, consumer spending and sound macroeconomic fundamentals. 

Ms. Adji candidly stated that the Philippines has yet to unleash the potential of FDI. Its inflow is below its potential due to a highly restrictive and regulated environment. Hence, more growth can be had if the restrictions and regulations are eased. Mr. Goswani listed other factors that could be seen as the challenges to further growth.  He cited the report of World Economic Forum on global competitiveness which names inefficient government bureaucracy, inadequate supply of infrastructure, corruption, tax regulations and rule of law as hindrances to growth. He also states that there is a need to accelerate investment in infrastructure, increase manufacturing and inclusive growth through SME internationalization.

Foreign Direct Investments are to the advantage of the Philippine economy and Filipinos. Ms. Adji notes that while economic growth in the Philippines is impressive it does not trickle down as the poverty rate has been static. It could directly help Filipinos as foreign employers often have more capability to pay better and give more benefits. Mr. Goswani expressed that an advantage of FDI is knowledge and technology spillover. He also further expressed that the country needs more spill over on manufacturing industry as it is lagging behind the services industry