PH among least attractive to foreign investors

The Philippines placed second to the last among 14 Asia-Pacific economies ranked by UK-based Oxford Economics on attractiveness to foreign direct investment (FDI) due to its poor infrastructure and competitiveness rankings.

In a report on Monday, Oxford Economics lead Asia economist Sian Fenner ranked the Philippines only ahead of Taiwan in the think tank’s latest FDI attractiveness scorecard.

In first place was China, followed by Vietnam, which Oxford Economics said was “set to continue gaining from supply chain restructuring.”

Malaysia, India, Australia, Indonesia, South Korea, Hong Kong, Japan, New Zealand, Singapore, and Thailand also ranked higher than the Philippines.

The scorecard measured labor dynamics, quality of infrastructure and logistics, political and business climate, market size and potential, as well as export structure.

Oxford Economics said that medium-term FDI prospects across Asia-Pacific remained “strong, even though pandemic-driven supply disruptions and uncertainties over the pace of recovery may see some firms rethink their supply chains.”

But in the case of the Philippines, it being among the least attractive FDI destinations in the region, “adds further weight to our forecast that the extent of economic scarring caused by the pandemic will be especially large,” Oxford Economics said.

The Philippines and Indonesia’s strength lie in their labor force, Oxford Economics noted. “Ongoing urbanization and a relatively young workforce mean that over the next decade we expect the labor supply in these two economies to rise by 25 million. We also forecast their average annual earnings to be around a third lower than in China in 2029.”

But “the Philippines and Indonesia both score poorly in infrastructure and business environment,” Oxford Economics said, citing the latest Global Competitiveness Report where the Philippines ranked 92nd out of 140 countries in infrastructure quality.

This was the reason behind the Duterte administration’s ambitious “Build, Build, Build” program, which wanted to address the previous infrastructure lack, especially road connectivity and electrification that scored poorly in the Global Competitiveness Report.

“The Philippines and Indonesia also score poorly in terms of firms’ ease of doing business. According to the World Bank’s Ease of Doing Business Report 2020, they are both ranked 70 or above out of 190 countries, comparing unfavorably to the advanced Asian economies and several of their regional peers,” Oxford Economics added. The Washington-based lender’s annual doing business report was discontinued this year amid an ongoing probe on alleged data irregularities in previous years’ reports.

Oxford Economics nonetheless pointed to moves across the region to attract more FDI. “The Philippines lowered the corporate tax rate to 20 percent from 30 percent at the start of 2021 and plans to ease mandatory local employment requirements for foreign investors,” it noted, referring to the Corporate Recovery and Tax Incentives for Enterprises Act or CREATE Law.