PHILIPPINES

Philippines pushes to ease Asia’s toughest Foreign Investment Rules

The Philippines is known for having tough rules in terms of Foreign Direct
Investments (FDI) as it aims to establish such investments for the benefit of its
constituents, the Filipinos. Hence, with that note, with the spark of the pandemic
and the losses it brought to the country’s economy, it now aims to loosen the
strict rules on foreign direct investment as it was long seen as a reason why
global companies have not yet taken into consideration investing in the country.

According to the central bank, the net foreign direct investment in the
country dropped 24.6% to 6.5 billion in 2020 making the year 2021 as the third
consecutive year of decline in the industry. As the team researched regarding the
FDI status of the different countries around the globe, the team has come to the
conclusion that FDI’s shift and vary from country to country. An instance for that
is China’s current domination as the recipient of foreign direct investment
instead of the United States in which they brought 163 billion inflows compared
to the 134 billion from the United States. Another is Egypt’s conviction on the
increase in the foreign investment in terms of the energy sector for the year.
Thereupon, the team can say that the foreign direct investments vary from
country to country as it is dependent on the country’s performance.

The FDI in the Philippines is a good option for businesses that want to go global

Foreign Direct Investment is a good option for businesses that want to go

global because it offers a pathway for more opportunities for the company to
grow and be known. According to Chen (2021), FDI is a practice of investing or
starting businesses in foreign countries. An example is when a fast-food chain
company decided to open their operation in another country, either by opening
a new branch or by partnering with any local firm through a merger or joint
venture. It is said to be FDI if the investment acquired is at least 10% ownership
of the foreign company, allowing the investor to have control or substantial
influence over the decision-making of the said company. In addition, FDI can also
provide new technologies, products, management skills, can also promote
competition in the domestic input market, and many other business
opportunities.
 According to Endo (2021) in his article, he implies that Ramon M. Lopez,
secretary of trade and industry, stated that the administration will continue to
embrace liberalization in order to improve the country's competitiveness. This
means that the Philippine Senate is set to vote on amending the three laws
which include the Foreign Investments Act, the Retail Trade Liberalization Act
and the Public Services Act, which were approved by the country's House of
Representatives in the previous year.

Furthermore, House Speaker Lord Allan Velasco, an ally of Duterte, has

also proposed changing the country's constitutional prohibitions on foreign
investment, adding a clause allowing exceptions under special laws to provide
for more flexibility in easing constraints. It is also noted that previous
administrations attempted to enact legislation to stimulate foreign direct
investment, but industry opposition impeded their efforts. Thus, the current
administration is hoped to be remembered for succeeding where previous
administrations failed to do. The aforementioned statements have proven that
Foreign Direct Investment (FDI) is such a good option for businesses that want to
go global as this provides great opportunities for the country.

The future of FDI in the Philippines

Foreign Direct Investments (FDI) have the ability to help economies

recover from the pandemic. Evidence from previous crises has demonstrated
that foreignowned affiliates, especially small and medium sized businesses, are
more resilient during crises due to their ties to their parent corporations and
access to their financial resources.

The Philippines remains an emerging market for FDI, with major

improvements to the regulatory landscape increasing the attractiveness of the
country as a destination to deploy capital. Government focus on reducing red
tape, increasing public funding of infrastructure, potential easing of certain
foreign ownership restrictions and an opening up of the Philippines as a gateway
into the wider Asian market bode well for investors in the coming years.

Despite these improvements, doing business in the Philippines remains

challenging for foreign investors. Large family-owned conglomerates still
dominate many lucrative business sectors and crowd out smaller businesses and
new entrants. Early long-term planning is recommended when considering
investments into industries that are subject to FDI caps. It is important to
address the many corporate regulatory requirements as early in the investment
process as possible with guidance from local advisors.

This can be concluded that Foreign Direct Investment in the Philippines

has yet to prosper due to the fact that the government has imposed a lot of
constitutional restrictions to foreign investment. This is evident in the article as it
was reported that in 2020 the Philippine Central Bank has reported a drop of net
foreign investment from 24.6% to 6.5 billion. However, the legislation has also
decided to amend three laws to support foreign investment in the future. This
means that there could also be a possibility that the Philippines will be open to
foreign investments as this will give the country more jobs for the Filipinos and
more capital for the country to be developed.

Team:

Country name: Philippines! 🇵🇭

Cabanero, Jan Carla

Gebone, Hanna Marie
Hugo, Amabele
Nene, Jannah Mae
Rosalejos, Chrischa Marie Q.
Villosillo, Sheila
REFERENCE:

Chen, J. (2021, February 12). Foreign direct investment. Investopedia. Retrieved on July 14,
2021 from https://www.investopedia.com/terms/f/fdi.asp

Endo, J. (2021, March 11). Philippines pushes to ease Asia's toughest foreign investment
rules. Nikkei Asia. Retrieved on July 13, 2021 from
https://asia.nikkei.com/Economy/Philippines-pushes-to-ease-Asia-s-toughest-foreign-
investment-rules