NATIONAL UNIVERSITY

Manila, Philippines

FOREIGN PORTFOLIO INVESTMENT IN

EMERGING MARKET IN PHILIPPINE
SETTING

A Project Case Study

Presented to
The Faculty of College of Business and Accountancy
Accountancy Program
National University

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In Partial Fulfillment of the

Requirements for the course
ECONOMIC DEVELOPMENT
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Presented by:

Names of Members
Acuzar, Joyce
Brucal, Camille M.
Danao, Ma. Erika D.
Obra, Lei
Rey, Alexis Mae R.

Presented to:
MR. IRENEO R. AGUILAN

December 3, 2018

COLLEGE OF BUSINESS AND ACCOUNTANCY

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 NATIONAL UNIVERSITY
Manila, Philippines

I. INTRODUCTION

The emerging equity market is an attractive investment for investors, which

emerging countries can offer higher return and higher risk. Numerous equity and debt
options are offered to investors who seeks of a country to invest. The Philippines has
gradually shifted from an agrarian to an industrial and service-oriented economy. This
low level of productivity and slow growth in the Philippines’ agricultural sector has
resulted in a high incidence of poverty within the sector. The lack of government
initiatives has been primarily responsible for the decline of the agricultural sector,
which has suffered from poor infrastructure and low levels of investment. These
factors got accentuated with the long seasons of drought that the country suffered.
The major industries of the Philippines include manufacturing and agribusiness. Within
manufacturing, mining and mineral processing, pharmaceuticals, shipbuilding,
electronics, and semiconductors are the focus areas. The agribusiness is mainly
composed of processed fruits and vegetables, seaweeds, tropical fruit purees and
juices, fresh tropical fruits, mango seed oil, sugar plantation, bioethanol, biofuels and
coco methyl ester.

STATEMENT OF THE PROBLEM

This research aims to find evidences to the Foreign Portfolio Investment in

Emerging Market in Philippine Setting More specifically, it seeks to find the answer to
the following questions:

1. What are the advantages and disadvantages of foreign direct investment in

the Philippines?

2. What are the factors that makes up the foreign direct investment in the
Philippines?

3. How important is foreign investment in Philippine economic growth?

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 NATIONAL UNIVERSITY
Manila, Philippines

ALTERNATIVE COURSES OF ACTION

1. (a) Advantages
Firstly, with FDI, international trade made it easier, and spurr economic
development which creates a beneficial environment for the investors and to the
local industry. They build new companies and create new opportunities for
people to be employed and this leads to increase in income and buying power of
the people that leads to an economic boost. Another one big advantage is, the
development of human capital resources. Foreign direct investment allows
resource transfer and other exchanges, where new technologies and skills can
be access by different countries. It also reduced disparity between revenues and
costs which means countries can make sure that it can be sold easily, and
production cost will be the same. The workforce productivity in the Philippines
also increased with the facilities and equipment provided by the Foreign direct
investment. Another big advantage is the increase of our country’s income. With
higher wages, the national income increases. As a result, economic growth
spurred.

(b) Disadvantages
However:for all its positive aspects or advantages, the foreign direct
investment has this what we called, disadvantages or cons. Political issues can
instantly change, it can be risky. As we notice there are changes in our country’s
exchange rates it is because of FDI, that can be an advantage of one country
and can be disadvantage to another. The major effect that our country is
experiencing now is the Inflation increases, local market is affected badly it is the
indirectly disadvantage of foreign direct investment, the economically backward.

2. Factors that makes up Foreign Direct Investment in the Philippines are

Economic, Social and Political. In economic, the inventors’ preference based in
gross domestic product, inflation rate and exchange rate. Then in social, the
foreign investors’ decision depends on the improvement of country’s social
issues, so the crime rate and literacy rate are being observed. Lastly political,
inventors also looked at the Corruption Perception Index (CPI) and Democracy
Rate.

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 NATIONAL UNIVERSITY
Manila, Philippines

3. Foreign investment is important due to the fact that it develops our economic
growth and improves the economy itself. The innovation it brings can change our
economy to a better one.

Proposed Solution

Equity market contribute to the emerging economies of different countries.

Foreign or even local investment helps the country generate and increase its
economic rate. Along with the other factors that increase economic rate, equity
market faces its own challenges, and it should be resolved as long as possible as it
will affect the economy of an emerging country. To increase the Foreign Portfolio
Investment, government should create policy that will attract investment coming from
foreign countries. Policies that will benefit these investors as well the country. The
Nigerian Government introduces Structural Adjustment Program (SAP) that attracts
foreign investors through the stock market. Some policy contents of SAP are to
remove the controls of exchange rate, interest rate, to increase the level of savings
and investment inflows, to enhance institutional structure and supervision, to spur
economic growth through reduction of unemployment, and to strengthen the money
and capital markets. The policy objectives of SAP was to empower the Central Bank
of Nigeria (CBN) and other institutions such as Nigerian Stock Exchange to carry out
reforms necessary to allow international best practices in financial markets to flourish
in the country.

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