Haniel Oliver L.

Alvarez International Political Economy

AB Foreign Service 301 Sir. Jumel G. Estrañero

Philippine FDI, Issues and Platform of Growth in 2018 :

“Foreign Direct Investment an Inevitable Need”

Foreign Direct Investment (FDI) are investments in businesses in one country by a company
from another country. These is where the foreign investor establishes ownership control, and has
a controlling interest over the company that was bought. There are three types of FDI; the first
one is the horizontal FDI wherein investors are forming the same businesses that they operate in
their home countries. An example is that China’s Telecom Company is offering same service in
the Philippines together with smart and globe and become the third Telecom in the Philippines.
Next is the Vertical FDI, this is where investors form different but related business to investors’
main business for example Japanese cosmetics manufacturer invests in coconut oil firm and for
them to have a direct access to raw materials. Lastly is the Conglomerate FDI where the
investors get businesses which is entirely different from an investors’ existing business in their
own country wherein it often involves a joint venture with a company that is operating in the
country. While its three forms are the greenfield, which is a company who builds operations
from nothing, then the Brownfield where a company that leases its existing faculties and land
and of course the last but not the lease which is the takeover that a company which is foreign that
acquires an existing local company.1 While the central bank defines foreign direct investments as
actual inflows from overseas, which could be in the form of reinvestment of earnings, equity
capital, and borrowings between affiliates.2

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The FDI helps mostly the developing countries through the global economy, investors and
recipients. A good aspect of the FDI is how the capital goes to the businesses that has the best

1
"FDI_Part 1: What is Foreign Direct Investment (FDI)?" YouTube. January 30, 2017. Accessed March 13, 2018.
https://www.youtube.com/watch?v=SofsHEnt4PU.
2
Lucas, Daxim L. "FDIs surge to $10-B in Duterte's first full year." Inquirer Business FDIs surge to 10B in Dutertes
first full year Comments. Accessed March 13, 2018. http://business.inquirer.net/247542/fdi-foreign-direct-
investment-duterte-economy-inflow-increase.
growth prospects since business investors are looking for the best return with the least risk.
Another advantage is its diversity where racism isn’t an option since the profit motive is
somehow color-blind and do not care about politics or religion, what color you might be, race
you’re from or even creed. It lessens the effects of bribery, politics and cronyism and as an
outcome those best business around the world are given a reward and that is for their goods and
services to go to the market faster than without unrestricted FDI. Then when it comes to the
recipients they can see a rise in the standard of living because of the recipient company benefits
from the investments.

On the other hand the FDI’s disadvantages is when foreign investors could be able to strip the
value of the business without adding any. Since they could sell unprofitable parts of the company
to local, those who are less sophisticated investors. Which might work but still it is a long
procedure to follow another one is that when foreign ownership of companies are allowed since
they can lower the comparative advantage of the nation, in accordance to an IMF reporter.3

Today China is a huge part of economic cooperation with the Philippines especially since there
are a lot of Chinese business man in the Philippines and even when it comes to investors. Then
Australia is another one that has been a partner of the Philippines of more than 70 years and a
shared interest and values , which are supported by string people-to-people links and through this
economic cooperation still takes place.4 India is also a part and is considered as a part of the
economic cooperation with the Philippines but not only that even in terms of military they
support the Philippines. The Philippines can then engage with China due to its connection
through the international disputed islands and can either use the case to an advantage or vise
versa while for Australia being one of the longest bilateral partner economic cooperation is
natural and India due to the administration of the Philippines being headed by president Duterte
they are fond to be of help to the Philippines especially those that are part of the ASEAN Region.

The major challenges of the Philippines when it comes to the FDI stability depends on the
Filipino people whether how the Filipinos will react to foreign goods and services and how
they’ll accept it, knowing the Filipino since I am one it is evident that Filipinos will choose
branded foreign products rather than local ones so keeping the stability for those that are already
here can somehow be managed. Now in regards to instability which is quite inevitable, it is
worrying how terrorism for example in Marawi which is just recent can somehow be a factor for
investors to move away of the Philippines and might even be scared to invest unlike in the time
of Fidel Ramos where investors are rampant. Another factor is the Philippine President Duterte
and his war on drugs that has kept other investors from investing since news is spread on how
this violates the human rights and how this should be stopped. Well despite all of that the

3
Amadeo, Kimberly. "Advantages and Disadvantages of Foreign Direct Investment." The Balance. Accessed March
13, 2018. https://www.thebalance.com/foreign-direct-investment-fdi-pros-cons-and-importance-3306283.
4
"Australian Embassy in." Home. Accessed March 13, 2018.
http://philippines.embassy.gov.au/mnla/relations.html.
Philippines is still one of the fastest developing country and the stability of the FDI is quite vital
for the economy.

The Philippines can improve FDI and to maintain the investment atmosphere in the Philippines
through promotion to other states which the President is doing so personally I think that’s a great
Idea and that our president knows what he is doing. Not only outside of the country but also
inside due to globalization we can see foreigners spreading across the Philippines and they are
carrying their nationality with them so they are also possible Foreign investors, so here in the
Philippines the services should be developed and improved for everyone regardless of nationality
for others to feel that they belong. It is also needed for globalization of goods and services that
are being invested upon be promoted and patronized across the world to create a strong
relationship amongst states. Relationship is the key an economic linkage should be adhered each
country helping one another and that is through partnerships and economic cooperation. Lastly
the Philippines should stand on what is right headed by the President and not conform to the
world but at the same time cooperating for the betterment of the country and its citizens since no
matter what happens the world can’t just erase the Philippines since it has been a vital part of
history. Even today we can see how the Philippines is now booming when it comes to
investments specially last year, 2017 of having the FDI inflows reach a record high of $10 billion
which was 21.4 percent higher and more and more investors view the country as a favorable
destination regardless of the controversies though some are kept a way still there are those that
continue according to BSP Gov. Nestor Espenilla Jr.5

5
Lucas, Daxim L. "FDIs surge to $10-B in Duterte's first full year." Inquirer Business FDIs surge to 10B in Dutertes
first full year Comments. Accessed March 13, 2018. http://business.inquirer.net/247542/fdi-foreign-direct-
investment-duterte-economy-inflow-increase.