Foreign Direct Investment in the Philippines
FDI in Figures
Foreign direct investment (FDI) had clearly decreased since 2008 due to the unfavorable international economic environment; however, it has started to rebound again in 2010. Considering the comparative advantages of the Philippines, such as: English speaking and well-skilled manpower, a strong cultural proximity to the United States, its geographical location in a dynamic area, the FDI flow in the Philippines is rather weak. This can be partially explained by the fact that the country is evolving into a service society, with a low capital strength, which means a need of minimal equipment. In addition, the government favors subcontracting agreements between foreign companies and local enterprises rather than FDI in the strict sense of the term. Lastly, corruption, instability, inadequate infrastructures and not enough juridical security discourages investment.
Country Comparison For the Protection of Investors
|Philippines||East Asia & Pacific||United States||Germany|
|Index of Transaction Transparency*||2.0||5.2||7.0||5.0|
|Index of Manager’s Responsibility**||2.0||4.5||9.0||5.0|
|Index of Shareholders’ Power***||8.0||6.3||9.0||5.0|
|Index of Investor Protection****||4.0||5.3||8.3||5.0|
Source: Doing Business
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.
|Foreign Direct Investment||2007||2008||2009|
|FDI Inward Flow (million USD)||2,916||1,544||1,948|
|FDI Stock (million USD)||20,463||21,611||23,559|
|Performance Index*, Ranking on 141 Economies||112||122||110|
|Potential Index**, Ranking on 141 Economies||77||80||-|
|Number of Greenfield Investments***||97||140||120|
|FDI Inwards (in % of GFCF****)||13.8||6.3||11.6|
|FDI Stock (in % of GDP)||14.2||12.9||14.6|
Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
Why You Should Choose to Invest in the Philippines
- Strong Points
- The country's main strong points are:
- A skilled English-speaking workforce;
- A large domestic market;
- Its membership to ASEAN;
- A favorable investment policy;
- A very advanced legal system;
- A strategic location at the Asian gateway; and
- Considerable natural wealth.
- Weak Points
- The country's weak points lie in its political instability, the bad quality of its infrastructures, judicial precariousness and lack of transparency.
- Government Measures to Motivate or Restrict FDI
- Laws liberalizing business practices have opened up more fields to foreign investments and have provided foreign investors with the same incentives as ASEAN members, as well as simplified procedures.
- Bilateral Investment Conventions Signed By the Philippines
- The Philippines have signed bilateral investment agreements with many countries, listed here.
Procedures Relative to Foreign Investment
- Freedom of Establishment
- Not guaranteed.
- Acquisition of Holdings
- A majority holding interest in the capital of a local company is legal in the Philippines.
- Obligation to Declare
- The agency for the promotion of foreign investment in the country provides information about the authorizations required for setting up business.
- Competent Organization For the Declaration
Philippine Board of Investment
- Requests For Specific Authorizations
- The sectors open to foreign investment after an authorization has been obtained are listed in Annexe B of the Foreign Investment Act.
- Investment Aid Agency
Board of Investment
- Tenders, Projects and Public Procurement
Tenders Info, Tenders in the Philippines
Asian Development Bank, Procurement Plans in Asia
DgMarket, Tenders Worldwide
- Other Useful Resources
Philippine Chamber of Commerce and Industry
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Learning how to approach certain tasks as a foreign manager in the Philippines with greater cultural sensitivity and skill will help you get the job done.
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