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HSBC: More FDIs may flow to Asean, except Philippines

Bank sees PH potential, but urges reforms to hasten progress

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Despite its favorable demographics, the Philippines continues to miss out on a greater share of foreign direct investments (FDIs) due to a “restrictive” foreign ownership policy and “uncompetitive” business environment, British banking giant HSBC said.

“We believe the country has great potential to attract investment but significant reforms are needed to make it happen,” HSBC economist Trinh Nguyen said in a research paper.

But the economist said that with the prevailing political conditions, any such reform would not likely take place until 2016, the year President Aquino leaves office.

“As such, we believe FDI will only increase marginally in the Philippines,” she said.

In a Jan. 9 research titled “The Great Migration: How FDI is moving to Asean (Association of Southeast Asian Nations) and India,” Nguyen said China received the most FDIs in the developing world since 1993, thanks to a surplus of labor, a large market and favorable policy. But rising costs from increasing wages, an appreciating renminbi and a shrinking working population have been pushing multinationals to relocate from the mainland. As a result, countries with large pools of labor, strong domestic demand and low costs have become attractive destinations, the analyst said.

The 10-member Asean comprises Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei Darussalam, Vietnam, Lao PDR, Myanmar and Cambodia.

In the past two years, she noted, investors have been going back to Asean for the growth potential while they hope to take advantage of lower costs. Now, the Asean accounts for 7.6 percent of the world’s investment flows while that of China stands at 8.1 percent.

The report noted that Indonesia and Vietnam are keen to attract more FDIs, while the Philippines and India—which both have a large labor supply and consumer market—are “more reluctant.”

FDIs to the Philippines may have increased from a low base, HSBC said, but its “restrictive” policy and “uncompetitive” business environment have hindered its growth potential. The Philippines has the worst competitiveness ranking in the Asean, according to the World Bank.

The Philippine Constitution prescribes the 40-percent foreign ownership restriction in mass media and advertising, educational institutions, land ownership, public utilities, and the exploitation of natural resources, except as provided by law.

“But it doesn’t have to be this way, the analyst said. “Consumption is robust and growth in the working population will be the highest in the region over the next three decades.


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  • Hayek_sa_Maynila

    FDIs are turned off when the host country’s currency keeps on strengthening because their labor cost continue to rise…moreso if power costs are one of the highest in the world and infrastructure is embarassing.

    However, its analysts from Foreign banks who always keep on talking up the peso and continue to urge the BSP to raise interest rates by saying that it will overheat if they do not do so. The analyst cited here is one of those urging the BSP to hike rates and are, therefore,  ”predicting” a strong peso.

    The BSP is no longer the gullible BSP you used to know who will believe in your archaic analytical models (output gap BS). BSP is learning to suspect your real intentions…to speculate in our markets when times are good and leave us behind with nothing, not even FDIs who have good intentions to locate in our country when you’ve already made enough money.

  • mamamiamia

    Ay naku, dito sa North America, hit na hit ang Pilipinas sa mga big Fund Managers.  Bet nga nila ang Pilipinas at very well recommended sa mga big pocket clients nila.  Itong usapan na 60/40 ratio, wala silang pakialam dahil ang importante ay happy ang client nila at kumikita di lang ang fund managers kungdi ang mga clients nila.   Mama Mia!  tama nang itong usapang 60/40! Nakakaloka kayo!

    • Jun Tuazon

      Agree but these funds like calpers are short term meaning they buy shares that they can onsell to the market when it suits them or at the slightest sign of problems these fund managers are out to make money for their members & they dont necessarily create jobs where they are invested.60/40 rule is very important to those who invest in big ticket items like infrastracture,mines, power generations etc.these requires lots of money & they can not simply pullout or sell even if they want to w/out the risk of loosing the lot.Kaya ang kuryente sa pinas is one of the most expensive in the world,we have the worst airports & traffic.

      • mamamiamia

        As I already mentioned, they don’t care as long as money flows in their portfolio.  Caviar and Champagne anyone! i ‘ll take one! Cheers! Salud! Gampay!

  • http://profile.yahoo.com/ZNAC47GDNU36VFUCQJPMQQCI6Q trevor.evans62

    Paragraph two on Page 81 of “Why Nations Fail”
    “There is strong synergy between economic and political institutions.
    Extractive political institutions concentrate power in the hands of a
    narrow elite and place few constraints on the exercise of this power.
    Economic institutions are then often structured by this elite to extract
    resources from the rest of the society. Extractive economic
    institutions thus naturally accompany extractive political institutions
    for their survival. Inclusive political institutions that expropriate
    the resources of the many, erect entry barriers, and suppress the
    functioning of markets so that only a few benefit.”

    This is the Philippines Oligarchy system without FDI, the rich get richer, the poor get poorer and some people are so deluded by nationalistic “pride” that they think this is a good thing for their country..it is not! Only fools believe that sending their countrymen to work overseas and help other nations prosper is good for their country, they are the most “unpatriotic” people in existence. A true patriot wants their country to be great and for their countrymen to prosper. A true patriot want their country to be seen as a leader, as a place others want to emulate, no one want’s to emulate the Philippines.  Most of the Middle class leaves the country to immigrate to other nations or to work as OFWs, this is very sad for the country and for their families. When I hear of Pinoy Pride, I think of all the poor people here that have no jobs, I think of the Pork Barrels and Gov’t Corruption, I think of all the broken families where the mothers and fathers are OFWs and not home for Christmas, I think of all the wasted opportunities.  Then I think of the foolish onion skinned Pinoys that are so full of self delusion and “pride” that they cannot see reality. They are proud to have the highest electricity prices in the World…they are proud that nearly 25% of the economy comes from OFW remittances, they are proud that 70% of the money in the economy comes from consumer spending…not manufacturing or exports. This is tragic. These people are fools, they are the kind of people that are proud to come 1st runner up in a beauty contest, or that claim that Manny lost his last two fight due to foreigners being “against” him, they are self deluded into thinking that these things matter, but these have no bearing on the average poor Filipino, who needs work, food and education.

    “We all know dogmatists who are more concerned about holding their
    opinions than about investigating their truth. … if they are mistaken,
    they will never discover it; they have condemned themselves to
    perpetual error. Human beings sometimes use their
    beliefs for wish-fulfillment. Too often we believe what we want to be
    true.”

     

  • Jun Tuazon

    It is ironic that the Phils. receives very small amount of FDI’s,mainly due to reasons that are very doable ie. restrictions on ownership,who will want to invest billions of dollars in long term just to be limited to 40% of the business,in most cases  the local partners are just dummies who’s only input is political capital.This is vital specially in big ticket items.The local businesses are also doing their bidding by spending lots of money specially during elections to protect their turf.Contracts are unilaterally broken at the whims of whoever is in power.Corruption exist everywhere but in most countries once the deal is done it’s a done deal,no second or more helpings.Ever wonder why Burma ( Myanmar) which just started openning their country to FDI’s got much more than the Phils?One doesn’t need to be a rocket scientist to understand this.

  • http://pulse.yahoo.com/_5UOZM4PWIDKO7G64HL3PPMXUTM Constantine

    The economist is a Vietnamese so he definitely lacks education, HSBC is a lot better without this economist. He doesn’t seemed to know pf what he is talking about. A typical Vietnamese! 

    • onionskinned

      …aaaand we got ourselves a racist, folks!



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