business climate

Why FDI inflow to the Philippines posted record decline

Makati Skyline
The Philippines: How can we contribute towards its progress?

Business World published an article, “Asian FDI gains noted by UN; investors bypassing Philippines?” In the BW piece, it was noted that our “Southeast Asian neighbors have been enjoying five fold increase in foreign direct investments, while the Philippines posted a sharp decline.” Benjamin Diokno was quoted by BusinessWorld saying, “that the disparity was likely caused by last year’s elections.” If it was simply a yearly snafu perhaps, but it is a known fact that for the past decade, FDI inflow to the Philippines has been on a decline.

The root cause has been two things. First: uncertainty in the business climate. For the past decade, investors have been repeatedly been burned by the schizophrenic policy the Philippines has employed. Contracts are not honored. Deals broken. A recent example is the SLEX project, which was in danger of it. If you will recall this is one of the questions raised when government launched PPP.

The second reason is the lack of infrastructure.

We’re not just talking about roads. We’re talking about Communications infrastructure. Our country’s network readiness is 85 out 133 countries in the world. Today’s business is data driven. That means, email more than Fax. That means Skype for a conference call. The infrastructure is that terrible and unless Government can untangle the mess of the ICT sector, people will be flocking to different countries.

We’re not talking about just communications infrastructure, on an industrial-agricultural dimension, the Philippines is an ideal spot for Contract Irradiation, yet we have none. Our friends in Vietnam, and Malaysia have several. The country is a great spot for it. Contract irradiation is a process where medical supplies like gloves, syringes are sterilized, as well as used to process talc for the fashion industry. It is also used to increase the shelf life of spices, kill fruit flies in mangos, just to name two.

In short, these are the places where government needs to draw emphasis on. Though it may take years to do so, as the focus of the government is to strengthen its fiscal position, and patch the leaks in the system.

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