Impressive 0.6% growth in foreign investments

US$ 21.322 Billion in foreign investments made in the Philippines. Big as it sounds its was only 0.6% more than the previous year. Compare that to 80 other countries which enjoyed a 7% annual growth. We have to do better if we are to catch up with them. Read this article to find what may be done to make the country attract more.

From Businessworld  Philippines

2 January 2012

Country lags behind peers in securing foreign investments

THE PHILIPPINES remains a laggard in attracting foreign direct investments compared with its Southeast Asian neighbors and more so with Asian peers, the International Monetary Fund (IMF) said.

In the 2010 Coordinated Direct Investment Survey, the IMF reported that the Philippines recorded $21.322 billion in inward direct investment positions in 2010, barely up from $21.194 billion in the previous year.

This pales in comparison with emerging economies in Southeast Asia and advanced economies in the continent. For instance, Indonesia posted $154.158 billion in inward direct investment positions in 2010, surging by 41.7% from $108.795 a year ago.

Also in 2010, Singapore, Thailand and Malaysia recorded $461.417 billion, $139.176 billion and $101.63 billion in inflows, respectively.

Direct investment is a category of cross-border investment where a resident in one economy has control or a significant degree of influence on the management of an enterprise resident in another economy.

“This new set of statistics supports old views that the Philippines is not an attractive destination of foreign investors,” Benjamin E. Diokno, economist at the University of the Philippines, said in an e-mail yesterday.

Mr. Diokno tagged poor infrastructure, difficulties in starting business and policy inconsistency as detractors to foreign investments.

“Every year we are among the lowest in attracting foreign direct investments,” Peter Lee U, economist at the University of Asia and the Pacific, said in a phone interview yesterday.

“The usual complaints in surveys are high electricity rates, poor infrastructure, quality uncertainty and inconsistencies in policies,” Mr. Lee U added.

In the continent, China posted the most inward direct investment positions, climbing by roughly 28% to $1.569 trillion in 2010 from $1.232 trillion a year ago.

It was followed by Hong Kong with $985.416 billion, up by 16.52% from $845.721 billion in the previous year.

Globally, inward direct investment positions rose in 2010.

“For the 80 economies that have reported data for 2009 and 2010, inward direct investment positions increased to $20.7 trillion from $19.4 trillion, up by nearly 7%,” the IMF said.

Much needs to be done for the Philippines to be more attractive to foreign investors.

“High power rates is an area we can continuously work on,” Mr. Lee U said. “There are also investments needed in improving infrastructures in the Philippines.”

Furthermore, the Philippines should take advantage of its labor force that are competitive in the service sector and are fluent in English, Mr. Lee U said.

Mr. Diokno said the country needs to invest P500 billion in physical infrastructure annually, reduce bureaucratic red tape in setting up new businesses both at the national and local levels, be more consistent in policies, and improve credibility of the government with respect to honoring contracts.

The survey of the IMF is conducted annually, with revised data released semi-annually, and country participation and geographical detail broadened over time.

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