Mariella S.

Palompo International Political Economy

AB Foreign Service 302 Sir. Jumel G. Estrañero

PHILIPPINES: A New Canvas for Foreign Direct Investments (FDIs)

Since the 1980s, Foreign Direct Investments (FDIs) has thrived at a remarkable rate. FDIs are
investments made by multinational enterprise in foreign countries to manage production
activities and control assets in those countries. It is oftentimes made in “open economics” which
offers the investors skilled workforce and above-normal growth prospects.

Having Foreign Direct Investments (FDIs) in a country has its advantage and disadvantages. The
main advantage of FDI is an economic boost. Also, it can stimulate country’s target economic
development, promotes easier international trade and creates jobs and opportunities. However it
also hinders domestic investments, affects political issues (of a country) which can lead to
expropriation, affects exchange rates negatively and worst, it might be a catalyst for a Modern-
day economic colonialism.

Developing countries, like the Philippines, are becoming increasingly appealing to the eye of
Foreign Investors, partly because it offers them an area of more created assets than those of
already developed countries. The impressive strengthening ties of Philippines and India could
pave the way to a more direct economic cooperation between the two countries. Indian
investments in the Philippines are mainly in the area of textiles, garments, Airports, automobiles,
IT&ITes, and pharmaceuticals. In fact, as of 2017, the estimated Indian Investments in the
Philippines are valued at more than $650 Million. Indian companies have also successfully
executed small to medium size projects in the Philippines, like the Kalpataru and Kamani
Engineering Corporation which is engaged in the engineering transmissions line projects in
Mindanao.

There’s indeed, a progressive involvement between India and Philippines, not to mention the
deepening defense relations and military exchange between them. Apart from the amicable
relationship and progressive economic as well as military cooperation, India and Philippines
have both young and efficient workforce, deployment of overseas workers and the proficiency in
the English language. Each of which aforementioned characteristics are of a great head-start to
further India-Philippines economic cooperation.

Thus, by investing in the Philippines, emerging India could broaden its networks and give its
businesses a competitive advantage. The Philippines in return could benefit from India by
adopting its latest operational practices, technologies, and financing tools. And by incorporating
them, the Philippines could give more opportunities to its citizens and raise their standard of
living by benefiting from the investments.
The globalization made countries, particularly the developing ones, more susceptible to Foreign
Direct Investments (FDIs). The Philippines transitioned its economy from agricultural focus to
service-based in order to be able to catch-up with its neighboring countries. As a result, the
Philippines became more subjected to Foreign Direct Investments (FDIs). As a matter of fact, the
Philippines was even labeled as “The Best Country to Invest In” by the US News last February.

The Philippines is particularly, a new canvas to a booming number of Foreign Direct

Investments (FDIs), as it surges up to $10 Billion in Duterte’s first year as a President. However,
we cannot repudiate the fact that there are some drawbacks that may challenge the stability of the
investments in the country. One great example is the “Extrajudicial Killings” that caused some
investors to doubt the country’s future of Foreign Policies and way of managing the economy.
Another is the rampant corruption, natural calamities, high power cost, poor infrastructures and
tax regulations in the Philippines.

One of the globalization’s largest impacts was the trade liberalization and investments. Because
of that, there was a significant increase in the inflow of Foreign Direct Investments (FDIs) in the
Philippines. In effect, the local businesses in the country would face the problem of
competitiveness and might also result in the decline of FDI outflows. There is also a greater
chance that it might result in a Modern-Day Economic Colonialism as the country becomes
vulnerable to the manipulation of foreign companies.

However, if we look at the other side of a coin, FDI inflows in the country causes an increase in
the productivity and Gross Domestic Product (GDP). It would also lead to the establishment of
new infrastructures and as mentioned earlier, a boost on the economy. Hence, the result of too
many outflows are the opposites of those above-mentioned.

To maintain the investments and avoid the outflow surge up in the country, the government must
build good infrastructures. Also, the government must promote the Philippines’ strategic
location, natural wealth (e.g. minerals, forests, fertile land). However, the government should
also protect and uphold its traditional power – the local businesses and workforce. The outflows
should also be monitored from time to time. And most importantly, transparency and political
stability should be exercised to attract more investors and ensure a healthy economic
environment.