San Pedro: Listless FDI

FOREIGN Direct Investments (FDI) may flatten out this year among developing countries in Asia including the Philippines due to an alleged “dysfunctional investment policy” prevailing among emerging developing countries.

The government should change tack in its investment policy framework in order to maximize the positive impact of foreign direct investments. What drives the foreign investors away? Is it the bureaucratic red tape, high cost of electricity and tax regime, etc?

The United Nations Conference on Trade and Development (UNCTAD) said the Philippines had rosy indicators but apparently failing to maximize its potential to attract foreign investments. There is now a need to review the country’s investment climate and the restrictions that block the economic artery.

The UNCTAD report has it that the Philippines was among the developing countries with “emerging market status and with growing investment potential (but) receiving FDI flows below expectations.” The other countries include Sri Lanka, Slovenia, Slovakia, New Zealand, Lithuania, Kuwait, Greece, Ecuador, and Bahrain.

FDI in the Asian region may drop to $420 billion this year from the $423 billion recorded last year because these countries did not maximize their potentials in attracting foreign investments.

Despite falling short of the levels expected in the FDI, the economic growth will sustain its momentum and was robust in the second quarter posting 0.125 from a revised 0.064 in the first quarter, according to the National Statistical Coordination Board.

In the first quarter, economic growth reached 6.4 percent on the back of a regime of benign inflation and good performance of the services and manufacturing sectors. Of the 11 indicators that make up the composite LEI, seven contributed positively visitor arrivals, number of new businesses, stock-price index, money supply, wholesale price index, hotel occupancy rate and terms of trade index.

The robust economic growth also comes in the wake of a sharp drop in unemployment rate from an estimated 13.8 million in March to 10.9 million adults, based on the May 24-27 survey of the Social Weather Stations (SWS). It said that the unemployed were either retrenched, resigned or were first-time job seekers.

This only showed that the economic policies of the Aquino administration were working.