‘Philippines least attractive to FDIs in AsPac’

Louise Maureen Simeon – The Philippine Star

October 12, 2021 | 12:00am


MANILA, Philippines — The Philippines could be one of the laggards in attracting foreign direct investments (FDIs) over the medium term, as the impact of economic scarring on the country remains among the worst in Asia-Pacific.

In the latest FDI attractiveness scorecard of London-based Oxford Economics, the Philippines ranked 13th among 14 other major economies in Asia-Pacific.

It had a scarring score of -0.4, the same with Taiwan, which ranked at the bottom of the scorecard.

The Philippines got negative scores in three of the five categories considered, namely quality of infrastructure and logistics, political and business climate, and market size and potential.

“We see the Philippines as being one of the least attractive among the Asia-Pacific economies. This adds further weight to our forecast that the extent of economic scarring caused by the pandemic will be especially large in the Philippines,” Oxford lead Asia economist Sian Fenner said.

In the region, it scored the worst in the quality of infrastructure and logistics as it is expected to be among the lowest in terms of infrastructure investment by 2025 at only 2.3 percent of gross domestic product. Its quality of transaction and trade infrastructure is also poor.

Despite improvements over the past five years, the Philippines is ranked 92nd out of 140 countries in terms of quality of infrastructure.

The Philippines is also at the bottom in terms of political and business climate, with the country being the most restrictive in FDI and scoring low in ease of doing business.

“Uncertainties over the pace of economic recovery, and risk of restrictions being reimposed amid low vaccination rates in several economies, are likely to weigh on FDI prospects in the short term,” Fenner said.

She added that Southeast Asian economies are pursuing policies to attract more FDIs. The Philippines has lowered its corporate tax rate to 20 percent and is planning to ease mandatory local employment requirements for foreign investors.

The government has been pushing for amendments to the Foreign Investments Act, Public Service Act and Retail Trade Liberalization Act.

Changes in these laws will ease restrictions on foreign businesses, introduce changes to the definition of public utilities, and allow greater foreign investment in telecommunications and transportation.

It will also reduce the minimum required paid-up capital for foreign retailers. All these three measures have been certified as urgent by President Duterte.

Meanwhile, the Philippines scored among the highest in labor dynamics amid ongoing urbanization and its relatively young workforce. It only scored a minimal 0.1 in export structure.

Regionally, Oxford said prospects for FDI inflows into Asia-Pacific over the medium term remain strong despite pandemic-driven supply disruptions and uncertainties over the pace of recovery.

Of the 14 economies, China is expected to remain the top destination for FDIs given its rapidly growing domestic market.

It will be followed by Vietnam, which will be the key beneficiary as supply chains continue to adjust to higher labor costs in China and trade protectionism. Malaysia ranked third in the scorecard followed by India and Australia.

Indonesia came in sixth, followed by South Korea, Hong Kong, Japan, New Zealand, Singapore, Thailand, the Philippines and Taiwan.

Last year, global FDI fell 35 percent to $1 trillion, hitting a 15-year low.

While performances differed significantly across countries in the region, Asia-Pacific remained an attractive destination for FDI as inflows rose six percent.

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