Ease foreign ownership restrictions, gov’t urged | Inquirer Business

Ease foreign ownership restrictions, gov’t urged

Single investment promotion agency pushed
By: - Reporter / @amyremoINQ
/ 05:35 AM June 25, 2015

The Philippines may again miss the boat in attracting foreign direct investments if the government will not move more aggressively to open up the economy and further ease foreign ownership restrictions in the Constitution.

“Missing the boat is a great possibility because if you try to study the economic history of the region, you will see several instances during which the Philippines has missed the boat insofar as attracting FDIs is concerned. Investors bypassed us in the ’80s and the ’90s when there were political risks, uncertainties and other significant factors deterring investors from coming in,” Gilbert M. Llanto, president of state think tank Philippine Institute for Development Studies (PIDS), said in a briefing yesterday.


“It seems that up to now we haven’t made up our minds. We should really try to relax these rules, and allow the entry of experience from other countries… In my personal opinion, we always enter into endless debate, while other countries are (continuing to) attract FDIs and have since been benefiting from these,” Llanto said during the launch of the United Nations Conference on Trade and Development’s World Investment Report 2015.

He stressed that attracting FDIs was not just about investments, but also about new technology, foreign expertise, value adding in products and services, and the jobs that can be generated from these investors. FDI inflow is also seen as a significant source of development finance.


Erlinda Medalla, a professor at the School of Economics at the University of the Philippines Diliman, admitted that foreign equity restrictions had been a major impediment, among other issues that the government should address.

“Addressing infrastructure and power requirements, and the (passage of the) Competition Law will go a long way. I think right we have many strengths that we could highlight such as our demographic dividend and English-speaking population,” Medalla said.

Llanto stressed the need to have a single, centralized incentives-giving body that would give the Philippines a better chance to boost FDI inflows.

“In general, the country’s investment incentive regime compares well with other countries. The problem is, we have several incentives-giving bodies such as the Board of Investments, Philippine Economic Zone Authority, and others. In other countries, there is only one, there is uniformity of standards, and they have harmonized investment regimes… I’d rather have one (agency) for efficiency than have these (investment promotion agencies) competing with each other or overlapping each other,” Llanto said.

FDI inflows in the country are projected to further increase this year, according to Llanto, on the back of improved governance and fiscal space. Last year, the country’s FDI inflows reached $6.2 billion while outflows stood at $6.99 billion , according to the World Investment Report 2015.

While the 2016 elections may cause some sense of uncertainty, it is not expected to drive away investors or drive down interests in the Philippine economy, Llanto added.

“Election creates some uncertainty on the part of investors, but the more information we provide to people about potential leaders the better for them to size up. Investors put a lot of importance on greater transparency… We are positive that (Filipinos) will elect a good leader because we have seen the creation of the constituency of reforms. This means that people who benefited from the reforms have seen the reforms work. So why would they elect bad leaders who can undo or reverse the reforms,” Llanto said.


Based on the World Investment Report 2015, global FDI inflows fell 16 percent to $1.2 trillion due mainly to “the fragility of the global economy, policy uncertainty for investors and elevated geopolitical risks.”

Inward FDI flows to developing economies reached their highest level of $681 billion, or a 2-percent increase year-on-year. Developing economies accounted for 55 percent of the total global FDI inflows last year, the report further showed.

The report noted the “massive worldwide financing needs for sustainable development and the important role that FDI can play in bridging the investment gap, especially in developing countries. (This is why) strengthening the global investment policy environment, including the international tax regimes, must be a priority.”

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TAGS: Foreign Direct Investment, Foreign investment, Gilbert M. Llanto, Investment, Philippine Institute for Development Studies
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