Reyes, Maita Angela G.

International Political Economy

AB Foreign Service 301 Sir Jumel G. Estrañero

The Philippines’ Setting Against FDIs

Foreign direct investment (FDI) is defined by Kasemsap (2017), “as an

investment in a business by an investor from another country for which the foreign
investor has control over the company purchased”1. It is considered as the important
indicator and driving force of economic globalization. Other than the technological
change that influenced the growth of FDI, it is also advocated by various political actors,
such as national governments and international organizations. Furthermore, FDI is
considered as a crucial determinant of attaining sustainable growth and development for
developing countries. For the Philippines, FDI is an indicator of the country’s reputation
as a favorable destination of investment. It can be proven by the high $10 billion FDI
that the Philippines has accumulated last year, as per BSP Gov. Nestor Espenilla Jr.
has said in a press statement2.

Foreign direct investment encourages employment, technological progress,

productivity improvements and the rapid increase and sustenance of enduring economic
growth. More importantly, it plays a crucial role in engaging the development finance,
foreign exchange, investment and tax revenue gaps in developing countries. It can
further as well the development efforts of developing countries by supplementing
domestic savings, employment growth, integration into the global economy, transfer of
modern technologies, improvement of efficiency, development of local suppliers, and
raising skills of the local workforce. However, FDI also has unfavorable effects to the
host country such as, decreased domestic savings and investments, transfer of
technologies that are unsuitable for the host country’s factor proportions, thus disabling
the increase of exports. It could also hinder the growth of indigenous firms that might
become exporters, and may cause the stagnation of the host country’s dynamic
comparative advantages by solely focusing on local cheap labor and raw materials 3.

India and China is now considered as important engines of regional and global
economic growth and that a strong economic partnership with the two would be
beneficial, as Tao Zhang, IMF Deputy Managing Director, have said4. India has become
an attractive economic partner and the World Bank has stated that private investments
in India is projected to grow by 8.8 percent in 2018-195. Meanwhile, China is the world’s
largest FDI destination6 and has continuously emerged as a strong superpower. Hence,
the Philippines should grab the opportunity to engage with two of Asia’s rising
economies once it arises. The Philippine economy should open its doors for the
unconventional choices that can guarantee growth and progress. Although every
economic partnership is beneficial, this is important to be highly well-thought out in
order to enable the country to align itself with other economic booming states.

The opportunities of FDIs are limitless given the advantages it has. However, it is
also a challenge for the Philippines’ setting. For instance, the Philippines cannot
ultimately accommodate FDIs that will not be suitable for the country. It’s like desiring
for a huge and wider national road and incessantly reconstructing, only to fail in the end
because it just cannot be; resulting to wasted time and energy, and discontentment. In
other words, without considering the country’s economic setting, FDI’s might not be an
opportunity, but instead a misfortune. Additionally, if there is no balance between
domestic and foreign investments, it is not impossible for FDIs to take power especially
over the Philippines’ economy. The inevitable rise of globalization can also affect the
FDI inflow and outflow of the Philippines. Globalization is empowered by FDI, hence the
advantages and disadvantages of FDIs influences globalization, leaving an impact on
the inflows and outflows of the country.

The Philippines, therefore, must prioritize at all cost the setting and capacity of
the country to accommodate FDIs. It should no less consider the possible investments
to open itself to, assuring that it will only result to opportunities, long-term growth, and
benefits. Second, the Philippine government should encourage domestic investors to
continuously pursue the economy of the country by providing benefits. Third, the
Philippines should continue exploring the endless opportunities provided by FDIs and
move forward expansion with complete thorough deliberation. Fourth, the Philippine
government should consider the neverending globalization and watch over the domestic
firms and protect them from the cons that FDIs also have. And lastly, the Philippine
government should educate the people of the Philippines about FDI and globalization
and how much of a benefit it is for the country, encourage them to engage themselves
within it, and assure them that the Philippines is capable and confident of being
competitive as well, despite being a developing country.

______________________
1, 6Ramesh Chandra Das, Handbook Of Research On Economic, Financial, And Industrial Impacts On Infrastructure

Development (Hershey, Pennsylvania (701 E. Chocolate Avenue, Hershey, PA 17033, USA): IGI Global, 2017).
2Daxim L. Lucas, "FDIs surge to $10-B in Duterte's first full year," Inquirer Business FDIs surge to 10B in Dutertes

first full year Comments, , accessed March 13, 2018, http://business.inquirer.net/247542/fdi-foreign-direct-investment-

duterte-economy-inflow-increase.
3Kenneth A. Reinert, Handbook Of Globalisation And Development (Cheltenham: E. Elgar, 2017).
4"India, China important engines of regional and global economic growth: IMF," The Economic Times, March 11,

2018, , accessed March 13, 2018, https://economictimes.indiatimes.com/news/economy/indicators/india-china-

important-engines-of-regional-and-global-economic-growth-imf/articleshow/63253588.cms.
5"Brand India," IBEF : India Brand Equity Foundation, , accessed March 13, 2018,
https://www.ibef.org/economy/foreign-direct-investment.aspx.