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Foreign Direct Investment
Amid a pervasive sense that the Philippine economy is underperforming and that foreign investors face significant barriers, certain swaths of optimism still emerge. Factors that point toward “more sustainable, stronger growth” and overall improved investor confidence in 2007 and beyond include a recently reduced deficit and a decreased rate of inflation; a “remittances boom” that creates new potential markets for investors; growing opportunities in business process outsourcing and mining; and a strengthened banking sector.
During the course of this diagnostic, various foreign investors, local officials, domestic private-sector representatives, NGO representatives, and others enunciated a number of shared concerns and priorities with respect to developing and sustaining foreign investment in the Philippines. Though not exhaustive of the range of topics pertaining to foreign direct investment (FDI), each issue warrants continued, high-level policy consideration. They include: (a) managing the influx of business process outsourcing, including through rehabilitation and maintenance of a strong cadre of human resources; (b) promoting increased competition in critical sectors; (c) improving the environment for agricultural investments; (d) addressing the insecurity of contracts as a deterrent to foreign investment; (e) recognizing the significant role of overseas foreign workers (OFWs) as investors; and (e) dealing with the problem of corruption.
In addition, the Philippines is undergoing an important public debate concerning the relative impact of financial incentives for foreign investors versus the need for tax revenues that support an infrastructure conducive to trade and further investment. This debate deserves a thoughtful exchange of ideas and a conclusion that is strategic and long-term with respect to anticipating the country’s role as an investment destination in the region and the world.
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