The score on our Foreign Direct Investments (Part 1: Better than 2016 )

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Talking about Foreign Direct Investments (FDIs) is a tricky issue, often misunderstood as  a gauge of how well foreigners like our government and how it runs our economy, or how well they like us as a people.

While that may be partly true, there is more to FDIs than this common misunderstanding.

Foreign direct investments pertain to how much money was put into the economy by foreigners, including new investments in new companies and the expansion of current investments or running businesses.  To stress on the former as one Senator would insist, is inaccurate, and does not reflect the international standard in reporting such a vital statistic.

In a famous Senate interpellation, he bewailed how much lower our FDIs were compared to before, only for others to realize later that he wasn’t using the same basis, as he cited only he fresh investments by newly formed companies, negating the contribution of business expansion by current ones. That said, combining both new cash for new investments and expansion of present ones is the correct method of deriving the FDI figures.

Nonetheless, when speaking of it in the Philippine context, generating investments  come with the defeatist thinking of being a laggard, and not “putting its act together” when compared with other countries.

For a long time we have placed in the bottom half of ASEAN in terms of attracting foreign direct investments. In 2015, we were at sixth place behind Indonesia and Vietnam, despite generating almost 6 Billion dollars. It seems that as ASEAN gathered steam as an investment destination, we were left behind two countries that many of our elites thought were beneath us in terms of education and skills.

Could we have fared better? Many analysts believe so, as the previous government’s underspending on needed infrastructure improvements dampened the chance for many investors to place their bet on the country, preferring other ASEAN countries with improved or improving infrastructure that lowers the cost of business.

1.5 years into Duterte: from sixth to fourth in ASEAN FDI

After one year and a half of Dutertenomics, how have we fared in terms of FDIs? Has 2017 been a better year for FDIs? Yes.

True enough, we have had a bumper harvest of foreign direct investments that has surpassed previous year’s achievements. Net FDI inflow for the 1st 10 months of 2017 grew 20.5% to $7.86 billion, from $6.52 billion in the same period in 2016. Even as the final 2017 figures have yet to be tallied, it’s a safe bet that we may well surpass 2016 figures. 2017’s figure moves us to fourth place, surpassing Indonesia and Vietnam.

Singapore remained the region’s most attractive investment destination last year with total FDI inflow of $53.91 billion,  followed by Vietnam and Malaysia at $12.6 billion and $11.33 billion, respectively. (Philippine Star: http://www.philstar.com/business/2017/11/14/1758582/philippines-moves-4th-place-asean-fdi) .

Here is some food for thought: It should be noted that labor and power rates in these two countries behind us are lower than ours, while those  above us pay higher salaries than we do, though our power costs are cheaper. Despite challenges, only Mindanao’s low power and labor rates stand a chance to compete with theirs.

Having fared better than before, we hope that this trend continues.

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