Arielle Faith R.

Villareal International Political Economy

AB Foreign Service 301 Sir. Jumel G. Estrañero

The Language of the Future: Foreign Direct Investments and Globalization

Foreign Direct Investment is an investment in a business by an investor from another

country for which the foreign investor has control over the company purchased. It is when an
individual or business owns 10 percent or more of a foreign company. It is important for
developing and emerging market countries because they need multinational companies to fund
employment that will boost international sales.

FDI can be an effective way for a state to enter into foreign markets. By entering foreign
markets, the state will have more opportunities to trade and socialize with other economies. This
will create more employment for the citizens, thus increase economic growth.

It is also an effective way for you to acquire important natural resources, such as precious
metals and fossil fuels. Through FDI, a state can obtain the resources that aren’t locally available
but is necessary.

But FDI can also decrease the domestic investments, that in my opinion, is less volatile
than FDI. It is also very risky because of the constant changing political situations in the foreign
countries. Countries should not allow foreign ownership of companies in strategically important
industries, especially industries that provide the daily necessities of the people. That could lower
the comparative advantage of the nation, according to an IMF report.

Moreover, FDI giants will monopolize the highly profitable sectors which will make the
earn more than the government. Lastly, if the foreign companies invest more in machinery and
intellectual property, it will not help the countries employment.

The Philippines should directly engage with Russia as part of Economic Cooperation
because Russia has resources that we lack and we have what they don’t. According to the
Department of Trade and Industry Russia was the Philippines’ 31st trading partner (out of 223),
44th export market (out of 211), and 27th import supplier (out of 203). The top Philippine export
product to Russia is carrageenan, seaweeds and other algae; while the top import of the
Philippine from Russia is petroleum oils and oils obtained from bituminous minerals. And Russia
is not that open, which will give the Philippines a chance to strengthen the economic alliance
before other states come in the picture. Strong economic alliance can also lead to Security and
Defense alliances which will be highly beneficial to the Philippines.

Since the Philippines is a state that is highly dependent on FDI and trading, if there
comes a time where the state will be isolated or a big foreign investor pulling out their portfolio,
there is a high chance that the Philippine economy will fail. The Philippines economy also has an
underlying problem of underdevelopment and that means it is not a as stable as it should be.
Stability should always be over growth because a stable economy is more dependable and strong
since it is well founded. Also, the continuous self-serving reasons of the key government players
is also a challenge because they mold the law to benefit them, not the state.

Globalization, is in a way the integration of the world, making it into single state
composed of different states. It enables the states to interact just like, a speed dating event where
the state can meet other states and be able to discuss their interests. Globalization gives the states
a chance to convince other states to invest or develop trade relations with them, either by interest
or by mutual need. It can give the state a stage to present what they have, what they can share
and what they need.

The Philippines should continue the two major industries, agriculture and production, but
it should be open to more domestic investors because it is more stable. But the Philippines
should also be open to FDI’s that will match the archipelagic features of the state. It should also
develop more relations with other rising economic super powers because they will be a little
more dependent to the Philippines rather than stable ones who can pull out anytime. The
Philippines should also venture into other industries that we might possibly have, industries that
we only have because that is a definite advantage when it comes to attracting Foreign Direct
investors. Lastly, we should be wary of very big investments to prevent the economy from
collapsing, like what happened to Bangladesh, where in China pulled out its FDI’s and led to the
collapse of the Economy of Bangladesh.

Stability over growth.

References:

http://business.inquirer.net/247542/fdi-foreign-direct-investment-duterte-economy-inflow-
increase

https://wealthhow.com/advantages-disadvantages-of-fdi

www.moscowpe.dfa.gov.ph/diplomaticrelations/jurisdiction/russia

https://thediplomat.com/2017/01/the-growing-russia-philippines-partnership/

https://www.dti.gov.ph/media/latest-news/10135-philippines-and-russia-to-bolster-trade-and-
investment-ties

https://www.heritage.org/index/country/philippines

http://carnegieendowment.org/2012/04/27/economic-and-political-challenges-in-philippines-
event-3645