• FDI inflows to Philippines increasing but still too small

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    Investment flow to the Philippines increased during the past few years but the country is still lagging compared to its neighboring countries, a new report released by the United Nations Conference on Trade and Development (Unctad) said.

    According to Unctad’s World Investment Report 2013, the flow of foreign direct investments (FDI) into the country went up by 54 percent last year.

    Presenting the report, Zeno Abenoja, director of the Department of Economic Research at the Bangko Sentral ng Pilipinas (BSP), said that FDI inflows in 2012 rose to $2.797 billion from the $1.816 billion recorded in 2011.

    “FDI inflows in the Philippines has been increasingly steady since 2003 to 2007 or the prefinancial crisis, as well as in 2011 and 2012,” Abenoja said.

    The BSP official added that the major recipients of equity capital investments in the country were the manufacturing, real estate and financial intermediation sectors.

    In terms of foreign investors profile, Abenoja noted that for the past decade, the United States, Japan and countries in the Association of Southeast Asian Nations (Asean) continue to be the top sources of FDI in the Philippines.

    Meanwhile, Norio Usui, an economist at the Asian Development Bank, said that the increase in the FDI inflows to the Philippines is a major achievement by the current administration for the past three years.

    However, he said that although FDI inflows in Philippines has been increasing, it is still small compared to its neighbors.

    “Still, the focal level of FDI in the country is too small. Sure, it can be improved given the strong economy, but my position is that [FDI level] it is not enough,” Usui said.

    Compared to the Philippines, the Unctad report showed that Asean countries such as Indonesia and Thailand have higher FDI inflows last year with $19.853 billion and $8.607 billion, respectively.

    The economist noted one of the reasons for this is the low labor productivity in the major sectors in the country, particularly in manufacturing.

    “The point is that the [labor productivity]in the Philippines still lagged and much of it is in manufacturing,” he said.

    He also said that one of the major problems of the economy is job creation, which can reduce poverty.

    “To change the economy to a more inclusive, we do need more job creation for poverty reduction,” he said.

    He explained that the labor force in the country now is at 40 million, which also increases at about 2 percent, or 800,000 new workers yearly.

    Despite the slow performance of the country in terms of FDI, the Unctad report said that the Philippines was among the bright spots in the Asean region.

    “Relatively low-income countries in Southeast Asia seem to be a bright spot for FDI. Inflows to Cambodia, Indonesia, Myanmar, the Philippines and Vietnam continued to grow in 2012,” it said.

    For East Asia and Southeast Asia, the report said that FDI inflows dropped slightly by 5 percent to $326 billion.

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