Harlyn D.

Obrador International Political Economy

AB Foreign Service 301 Sir. Jumel G. Estrañero

The Progress of Foreign Direct Investment (FDI) in the Philippines

Foreign Direct Investment is an investment made by a company or individual in one country in

business inerests in another country, in the form of either establishing business operations or
acquiring assets in the other country, such as ownership or controling interests in a foreign
company. Foreign direct investments are distinguished from portfolio investments in which an
investor morely purchases equites of foreign-based companies.

Foreign Direct Investment is critical for developing and emerging market countries. Their
companies need the multinationals funding and expertise to expand their international sales.
Their countries need private investment in infrastructure, energy and water to increase jobs and
wages.Foreign direct investment benefits the global economy, as well as investors and recipients.
Capital goes to business with the best growth prospects, anywhere in the world. That’s because
seek the best return with the least risk. This profit motive is color-blind and doesn’t care about
religion or politics. Recipient countries see their standard of living rise. As the recipient company
benefits from the investment, it can pay higher taxes. Unfortunately, same nations offsets this
benefit by offering tax incentives to attract FDI. Recipient business receive “best practices”
management, accounting or legal guidance from their investors. They can incorporate the latest
technology, operational practice, and financing tools. By adopting these practices, they enhance
their employees lifestyles. That raises the standard of living for more people in the recipient
country. It reduces the influence of local governments over them.

Countries should not allow foreign ownership of companies in strategically important industries.
That could lower the comparative advantages of the nation, according to an IMF report. Second
foreign investors might strip the business of its value without adding any. They could sell
unprofitableportions of the company to local, less sophisticated investors. They can use the
company’s collateral to get low-cost,local loans. Instead of reinvesting if, they lend the funds
back to the parent company.

The relationship between European Union and the Republic of the Philippines is a longstanding
one, which has broadened and depend remarkably in recent years. Europe’s dialogue with
ASEAN began in the late 1970’s, and was formalised in 1980 with the signature of an EC
Cooperation Agreement was the primary legal framework for EU relations with the Philippines.
Since 25 December 2014 the Philippines has enjoyed enhance trade preferences with the EU
under the EU’s Generalized Scheme of Preferences plus. Before that, the Philippines was a
beneficiary of the standard GDOP Scheme.
Graft and Corruption: The Philippine Government has made major strides in fighting graft and
corruption. President Duterte has stated he will not tolerate corruption. He has even provided
the Philippine public a hotline number to call to report inefficient and corrupt public servants.
Corruption, a constraint to business and outside investment, is a pervasive and long-standing
challenge in the Philippines. The country’s ranking in Transparency International’s Corruption
Perceptions Index has consistently declined; from 85 in 2014, 95 in 2015, to 101 in 2016.

Ineffective Judicial System: The Philippines’ complex, slow, and complicated judicial system
can inhibit the timely and fair resolution of commercial disputes. Most cases take many years to
reach a final verdict.Limited Ownership: The Philippines has restricted foreign ownership in
selected industries, including utilities and the media. See the Investment Climate Statement for
more information on these restrictions. The Government also lists several professions where
foreign participation is not allowed.