The Philippines always registered low levels of Foreign Direct Investment (FDI) when compared to its regional neighbors. High levels of corruption, an incredibly slow bureaucratic system, and restrictions to Foreign Investment in key business sectors are some of the historical reasons behind this legacy.
Catching Up
Recent figures show us a different trend. While there is a long way to go before catching up with its neighbors, according to the United Nations Conference on Trade and Development (UNCTAD), FDI in the Philippines rose sharply from $3.737 billion in 2013 to $6.201-billion in 2014.
Despite this increase, this number is still very low when since represents approximately half of FDI in Thailand – $12.566 billion- and almost 4 times lower than FDI in Indonesia – $22.580 billion.
Key Factors
Young demographics with 2% annual population growth, an English speaking and qualified human capital, consumerist society, a solid banking system and the strengthen in American economy and Dollar (USA is one of the main investors and one of the top export destinations) help us to understand this climb.
Room to Grow
Despite this increase, its undeniable that the Philippines still has lots of improvements to make. Its poor infrastructure system, restrictions on foreign investment – foreign investment negative list – and its high energy costs (Philippines is one of few countries in Southeast Asia that does not subsidize energy) are some of the country’s key factors behind its poor FDI levels.
Standpoint
FDI is expected to continue growing in the coming years due to the low oil prices, steady economic growth and stability of Philippine Peso. However, the continuous slowdown of the Chinese economy will create a negative impact and the presidential elections in 2016 (there is no clarify of the successor and its even less clear the agenda of the respective candidates) will play a decisive role.
Ultimately, if the Philippines aims to bring its FDA levels up to a closer level as of its neighbors, it must improve the investment in infrastructure, decrease the barriers to foreign investment, de-bureaucratize its political and economic institutions and deregulate key industries such as energy or retail.
Triple I has been in the Philippines since 2008. With over 500 incorporated companies in the Philippines and working with some of the Global Forbes 2000 in the country, our mission is clear: simplify investment and business in the Philippines.
