PH lags in attracting foreign investments

The Philippines saw foreign direct investment (FDI) inflows jump fourfold during the 2010-2015 period—the fastest growth among most Asian countries, but remained a laggard in terms of actual volume.

Asian Development Bank data in the report titled “Asian Economic Integration Report 2016: What Drives Foreign Direct Investment in Asia and the Pacific?” showed that the Philippines attracted $5.2 billion in FDI in 2015, up 303.2 percent from $1.3 billion in 2010.

The Philippines posted the highest growth when comparing FDIs attracted in 2015 from five years ago, outpacing Hong Kong’s 141.8-percent growth, India’s 61.2 percent, Vietnam’s 47.5 percent and Malaysia’s 22.8 percent.

However, ADB data showed that the amount of FDIs received by the Philippines last year was the lowest in the region, dwarfed by Hong Kong’s $174.9 billion, China’s $135.6 billion, Singapore’s $65.3 billion, India’s $44.2 billion, Australia’s $22.3 billion, Indonesia’s $15.5 billion, Vietnam’s $11.8 billion, Malaysia’s $11.1 billion and Thailand’s $10.8 billion.

The surge in FDIs in Asia as a whole “was driven largely by a buoyant market for M&As (mergers and acquisitions),” the ADB said.

But the report noted that “the decision over whether a multinational invests in greenfield FDI or uses the M&A route depends not only on traditional considerations of comparative advantage and integration, but also to a great extent on the investment policy regime and domestic regulations of the host economy.”

“In developing Asia, for example, domestic regulations in many economies—including the People’s Republic of China, India and the Philippines—limit foreign ownership in various industries to joint ventures, therefore erecting high barriers for greenfield FDI,” the ADB said.

Good governance in FDI destinations was also a major consideration among firms, according to the ADB.

“Multinationals from high-income economies are demonstrably more responsive to the quality of governance in developing economies than multinationals from emerging economies … [as] multinationals from emerging economies are less constrained by poor institutional environments,” the report said.

“However, this distinction between high-income and emerging-economy sources does not hold for Asian host economies, indicating that governance matters in the Asian context regardless of the developmental distance with the source economy,” it added. —BEN O. DE VERA