Satomi O.

Nakano International Political Economy

AB Foreign Service 302 Sir. Jumel G. Estrañero

The Contribution of Foreign Direct Investment in the Philippines

Foreign direct investment (FDI) is the international investment in which the

investor obtains a lasting interest in an enterprise in another country. It may take the
form of buying or constructing a factory or company in a foreign country or adding
improvements to the facilities of such business, in the form of property, plants, or
equipment.

Foreign direct investment (FDI) is important for developing and emerging

market countries because local companies need the multinationals' funding and
expertise to expand their international sales. Every business in every country needs
private investment in infrastructure, energy, and water to increase jobs and wages.
This Foreign direct investment (FDI) is especially applicable to developing countries as
history recorded where during 1990s, foreign direct investment was one of the major
external sources of financing for most countries that were growing economically and
helped several countries when they faced economic hardship. Another advantage of
having FDI in businesses is that they receive best practices management, accounting
or legal guidance from their investors. They also provide the latest technology,
operational practices, and financing tools that could enhance their employees'
lifestyles, raising the standard of living for more people in the recipient country.

Though foreign direct investment (FDI) could help the business and the
economy of country to boost and grow, there are some instances that it could also
lead to the downfall of the business or the economy of recipient country. Many
developing countries with a history of colonialism, fear that foreign direct investment
may result to the modern day economic colonialism, leaving the business of host
countries and their resources exposed that can lead to a situation that a company
may lose out on its ownership to an overseas company. Another disadvantage is that,
most investors are often drawn to places were natural resources are plentiful. This
causes destruction of environment where people or especially indigenous people are
being located. Mountains or villages were replaced by buildings and pollution
contributor factories and such infrastructures that are necessary for the expansion of
the state’s economy because they prefer a western-style environment, affecting the
health of natural resources, contributing to the factors that causes climate change
due to its elimination of natures that absorbs all pollutions caused by modern
technologies.
 Aside from Singapore, Japan, the Netherlands, the United States and
Luxembourg as the origin or source of equity capital infusions, Philippines can directly
engage with China and South Korea. China, since their relationship ties with the
Republic of the Philippines is deepening and had their agreement for economic
expansion of the Philippines. Another one is South Korea because nowadays, Korean
culture has a lot of impact in Filipinos from Korean artists, dramas, clothing, foods,
beauty products, gadgets and even Korean services are highly in demand for Filipinos.
On the other hand, there are a lot of Koreans travelling in the Philippines not just for
vacation but also for education and even prefer to reside in the Philippines. President
Duterte even encouraged and invited Korea to invest in the matter of manufacturing,
automotive, food production, processing, agribusiness with bigger area, electronics,
and energy. He also extended his gratitude to South Korea's importation of Filipino
products, including personal care, food, garments, and electronic components as part
of economic cooperation.

The major challenges of the Philippines in foreign direct investment (FDI) stability is
that Philippines have political instability often prone to corruption, some
infrastructures are in bad quality, lack of juridical security, tax regulations and
foreign ownership restrictions that discourage investment. Moreover, globalization
does affect foreign direct investment (FDI) inflow and outflow in the Philippines
because when investors are unsatisfied with the result of the business where they
invested upon, they could look for other countries to invest in. Another thing is that
as the world keeps on advancing technologically, investors prefer investing on
businesses that they could gain higher profits. In positive view, globalization affects
FDI inflows in Philippines because Philippines have cheaper cost of skilled English-
speakers labor forces, have a large domestic market and plenty of natural resources.
That’s why investors all over the world prefer to engage in business with Philippines
as its economy are growing successfully.

For the Philippines to improve foreign direct investment (FDI), maintain

investment climate and avoid outflow, Philippines should improve its governance and
eliminate corruption. It should create a better image that would catch the investors’
attention, should have a good negotiation deals and good relationship with investors
to prevent outflow and maintain the investment in their businesses. Philippines should
also improve their infrastructures and labor capacity in their job for investors to be
encouraged on investing since the state has good quality of necessities in the
business. On the other hand, Philippines should not depend too much on foreign direct
investment (FDI) because it might also cause downfall of its business.