Emerging economies are expected to grab even bigger shares of foreign direct investments (FDI) over the short to medium term as they take the role of economic growth driver globally.
This is according to the World Investment Report 2011 by the United Nations Conference on Trade and Development (Unctad), which said that “emerging economies are the new FDI powerhouses.”
According to the outlook of Unctad, global FDIs may reach between $1.4 trillion and $1.6 trillion this year, or back to the pre-crisis level.
Global FDIs are expected to further grow to $1.7 trillion next year, and hit next year the historic high of $1.9 trillion that was posted in 2007.
The report said emerging economies already accounted for half of the global FDIs, and they had the potential to further increase their share.
In the case of the Philippines, however, the country has yet to match the FDIs being cornered by its neighboring emerging economies.
Nonetheless, according to a ranking official of the Bangko Sentral ng Pilipinas, the country is expected to experience a surge in FDIs once the infrastructure projects under the government’s Public-Private Partnership (PPP) program begin.
According to the World Investment Report 2011, which was launched Tuesday, the outstanding amount of FDI inflows to the Philippines last year paled in comparison with inflows to neighboring countries like Malaysia, Thailand and Indonesia.
Based on Unctad’s estimates, FDI inflows to the Philippines stood at $24.89 billion by the end of last year. Indonesia had $121.53 billion, Malaysia had $101.34 billion, while Thailand got $127.26 billion.
BSP Deputy Governor Diwa Guinigundo, who was a resource speaker during Tuesday’s launch of the report, said the country’s investment climate continued to be dragged by relatively poor infrastructure and lengthy requirements in setting up businesses.
However, Guinigundo said, there are a number of favorable factors that should entice more foreign investors. These include benign inflation, a growing economy, improving fiscal condition of the government, and a stable and liquid banking sector.
Guinigundo said that once the infrastructure projects under the PPP program were started, more so if they were completed, FDI inflows into the Philippines would continue to surge. He said PPP projects would serve as impetus to more investments.
“It is very difficult to compete with other countries in the region particularly China, Malaysia, Singapore, Indonesia, Thailand, and even Vietnam because they are so much ahead of us [Philippines] in terms of infrastructure, and because requirements in doing business in their jurisdictions are much reduced,” Guinigundo said.
Guinigundo said, however, that the Aquino administration’s thrust to improve governance and ease the process of setting up businesses should eventually help attract more FDIs.
“It is a matter of time before we finally see the initial launching of the PPP projects. Once launched, they should usher in the coming of FDIs in a strong way. These projects should establish the fact that the Philippines is truly capable of conceptualizing big projects with big economic and social impact,” Guinigundo said.