‘Foreign investments continue to leave RP’
2010-07-28

THE country’s low economic growth and, to some extent, labor migration, has caused millions of dollars worth of foreign direct investment (FDI) to continue leaving the Philippines, according to the World Investment Report (WRI) released by the United Nations Conference on Trade and Development (Unctad) on Thursday.

The WRI data showed the Philippines’ FDI outflows continued in 2009 which was at $359 million, higher than the $259-million FDI outflows in 2008. The country’s FDI inflows, however, increased to $1.948 billion in 2009 from $1.544 billion.

Unctad data showed this is linked to the difficulties of the South, East and Southeast Asian region, especially during and immediately after the global economic crisis.

FDI outflows in the region dropped by only 8 percent to $153 billion in 2009, while FDI inflows dropped 17 percent to $233 billion in 2009.

“A drop in cross-border mergers and acquisitions [M&As] was largely responsible for the overall decline in FDI inflows to the region in 2009. The value of M&A sales totaled $35 billion in 2009, down 34 percent from 2008,” the Unctad said in a statement distributed at the Manila launch of the report in Makati City.

“Although total FDI outflows declined, nonfinancial FDI flows from China continued to expand, driven by a persistent pursuit of natural resources and M&A opportunities generated by global industrial restructuring,” it added.

In terms of local FDI flows, local economists said the decline in FDIs could be attributed to the anemic
economic growth and brain drain caused by the overseas Filipino worker (OFW) phenomenon.

In the forum, Dr. Josef Yap, president of state-owned think tank Philippine Institute for Development Studies, said the country’s “lack of economic transformation” is one of the biggest reasons for low FDI flows. He said this is evidenced by the share of manufacturing to GDP in the Philippines which, Yap said, stagnated to around 22 percent of GDP in 2009.

Yap said this has resulted in a low investment rate in the Philippines, around 15 percent to 17 percent. This was a deterioration from the 24 percent posted in 1997.

He said other countries like Indonesia have since recovered their investment rates and left the Philippines to become the investment laggard in the region. Yap said between 2000 and 2009, investment rate had been “steadily declining” in the Philippines.

http://www.businessmirror.com.ph/index.php?option=com_content&view=article&id=28061:foreign-investments-continue-to-leave-rp&catid=23:topnews&Itemid=58

Author: Cai U. Ordinario
Source: Business Mirror
Date Published : 2010-07-28

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