Weak FDI equals poverty – Oxford

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The Oxford Business Group’s (OBG) report on the Philippine economy said that the country’s foreign direct investments (FDI) remained “weak” for the past two years compared to other countries in Southeast Asia, which results in high levels of unemployment and poverty among Filipinos.

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OBG Editorial Manager Rodrigo Diaz told reporters in a Monday briefing that the weak FDI data of the Philippines at a time when its Southeast Asian neighbors were enjoying a boom in FDI inflows remains a challenge, along with streamlining of the credit processes, and easing the 60-40 business ownership rule, that only allows foreigners to own up to 40 percent of a business established in the Philippines.

Dan Steinbock, research director of the pro-inclusive growth group India, China and America Institute, said on the Oxford economic report for the Philippines that the country “lags behind” among Southeast Asian countries in terms of FDIs that resulted in high employment and poverty rates.

“While FDI did increase in the Philippines, the country missed out on the global explosion in cross-border investment, and, as a result, has high levels of unemployment and poverty,” the Oxford report said, citing Steinbock.

“He blames the poor business environment, saying that red tape, poor governance, weak infrastructure and a rigid labor market keep international businesses away,” Oxford added, referring to the weak standing of the country in World Bank’s Ease of Doing Business 2014 rankings, where the Philippines landed at 108th place against Thailand and Malaysia’s 18th and 6th spot, respectively.

Diaz said that there is a need to change the 60-40 ownership rule, which is unattractive to foreign investors.

“That reduces the flexibility and makes even the smallest change a matter of intense national debate—it is just impossible to tweak the system . . .
These kinds of restrictions not only make foreign investment difficult, but they stand in the way of major improvements that could be made within the economy but are not, for lack of international-level skills and technologies,” Oxford said, reflecting the words of Priscilla Tacujan of Corr Analytics.

Contrarian view
But Eduardo Francisco, president of BDO Capital and Investment Corp, told reporters after the Oxford press briefing that the Philippine economy does not need to depend on FDIs to improve, saying that the country has a lot of fiscal resources

“Even without the foreign investments, maraming pera ang Pilipinas [Philippines has a lot of money]. The reason we need them [foreigners]is because of their expertise, not the money . . . Are we underdeveloped? Not really,” he said.

“It is not because a foreign company is not interested in coming in, but it is because of the risks [of investing in the country],” he added.

The Bankgo Sentral ng Pilipinas said earlier this month that FDI inflows in the first 10 months of 2013 reached $3.4 billion, which was 35.3 percent higher than the $2.5 billion recorded a year ago.

The 10-month FDI amounting to $3.4 billion surpassed the central bank’s target of $2.1-billion FDI inflow for 2013.

The Oxford report said that though the Philippines’ overall economy outlook is positive and FDI is increasing, it needs to catch up with its Southeast Asian neighbors, since Vietnam recorded $8.3 billion, Thailand registered $8.6 billion, and Indonesia attracted $19.9 billion.

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1 Comment

  1. Lagging behind because dirty business crowded Philippines, red tape, bribe, manipulation, bureaucracy, strikes.