Recently, the Bangko Sentral ng Pilipinas ecstatically reported that the country’s foreign direct investments surged by more than 50 percent in the first seven months of the year. This was, according to BSP, due to the “country’s strong macroeconomic fundamentals”. Notably, net FDI inflows “amounted to $4.008 billion as of July, up 56.1 percent from $2.568 billion in the same period last year”. The BSP further reported that FDIs during the period were “coming from the United States, Hong Kong, Japan, Singapore, and Taiwan” and went into “financial and insurance, real estate, manufacturing, wholesale and retail trade, and transportation and storage activities”. However, based on such reports, most of these inflows are reinvestment of earnings and inter-company borrowings (this happens when parent companies abroad lend funds to their local subsidiaries/affiliates to either expand or simply sustain operations). Therefore, these are inflows that went to existing foreign owned or controlled companies operating in the country. Foreign companies that are forced to do it in one way or another. As far as new entrants are concerned, that remains the big question.
Historical data will help us sort this out. As reported by the World Bank through the East Asia Pacific Economic Update earlier this year, “developing countries in Southeast Asia gain much more economic benefits when they increase allowable foreign ownership”. This, the WB said, “leads to higher FDI inflows”. Truth to tell, vis-a-vis the size of the gross domestic product, the ASEAN region, has been the largest recipient of FDIs, in Asia Pacific. However, since 1952 until 2012, “Singapore accounts for more than half of total FDIs to the whole region at 52percent. Thailand ranks 2nd with 13percent, followed closely by Indonesia at 3rd with 11percent, at 4th is Malaysia with 10percent, Vietnam (the once war-torn country) ranks 5th with 8percent, and the Philippines is 6th with a miserable 3percent”.
Though, in absolute amount, we increased our FDIs this year when compared against last year, still, among foreign investors in the ASEAN, we are least likely chosen. We continued to be among the least preferred countries in the ASEAN in terms of FDIs. The fact is, weighed against that of other key countries in the ASEAN, ours will still pale in comparison. Take 2013 for instance. We were miles away from our Southeast Asian neighbors. With just US$3.859 billion in net FDI inflow, we were among the laggards at a consistently disappointing 6th place. Singapore, Indonesia, Thailand, Malaysia and Viet Nam grabbed US$60.645 billion, US$18.444 billion, US$13.000 billion, US$12.297 billion, and US$8.900, respectively. This year, despite the so called 50percent surged in FDIs as against the same period last year, we will continue to be among the cellar-dwellers. That’s a certainty.
The reasons are crystal-clear. The same report from the WB emphasized that “although FDI plays an increasingly important part in promoting economic growth in ASEAN, foreign ownership is restricted in many of these countries”. WB further emphasized that “based on statistical data, Thailand, the Philippines and Malaysia are among the most restrictive countries for foreign equity, while Cambodia and Singapore allow nearly 100 percent foreign ownership in most sectors”. This is the main reason why Singapore is lording it over other ASEAN member states. Cornering a huge 52percent of FDIs over the years. In the same token, we shouldn’t be surprised if the once war-ravaged Cambodia will soon overtake us in terms of FDI inflows and economic growth.
Thus, some of our skilled workers went to our Southeast Asian neighbors. They are working with, basically, foreign-owned (not owned by locals in these countries) companies. Among others, these are owned by foreign direct investors from the European Union (EU), Japan, China, Hong Kong, USA, South Korea, Australia, Taiwan and India. So that, instead of us directly benefiting from the economic activities brought about by these FDIs, we are now content in enjoying the meager multiplier effect out of the OFWs regular remittances. We say meager because had these FDIs been here, the benefits that shall be derived from the backward and forward linkages will be enormous.
However, some anti-foreign ownership advocate may say, what about Thailand and Malaysia, they are restrictive too. The reason is very clear. Statistics (with WB) would show that “the allocation of FDI among sectors greatly varies among countries”. As records will show, “Malaysia, Thailand and Vietnam were more on manufacturing concerns, while FDI inflows to the services sector are the highest in Singapore, Indonesia and the Philippines”. The reason is very simple. Infrastructures in Malaysia and Thailand are in place. Apart from it, power supplies are cheap and abundant, thus, making these countries lucrative for FDIs toward manufacturing. In us, with power supply as scarce as platinum and priced like gold, we will surely remain among the laggards.
Frankly, therefore, the 50percent surged is nothing to brag about.
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