Philippines joins list of most promising FDI destinations

BusinessWorld | Posted on June 20, 2016 09:54:00 PM

THE PHILIPPINES has emerged as among the world’s most promising destinations of foreign investments in the next three years, according to the United Nations Conference of Trade and Development (UNCTD).

In its World Investment Report 2016, UNCTD said the US, China and India remain the top destinations of investments by multinational enterprises (MNEs) between this year and 2018. However, the US, which since last year has shown signs of economic recovery, displaced China in this year’s UNCTD survey among executives belonging to the 100 biggest non-financial MNEs.

China was the top choice when the UNCTD last held its survey in 2014, or before the world’s second largest economy showed signs of slowing down.

The Philippines joined the top 15 destinations, placing eighth, along with Australia, France and Malaysia, which in the previous survey round ranked 14th.

The report recognized the “noteworthy measures” of the Philippines to liberalize foreign investments, particularly in removing the foreign ownership restriction on lending firms, investment houses, and financing companies, as well as reducing the number of professions reserved for nationals.

Another Southeast Asian economy new on the list is Myanmar, which ranked ninth along with Vietnam, which in turn rose from the 18th spot during the 2014 survey round.

Seven of the top 15 choice locations belong to emerging Asia, of which 5 came from Southeast Asia, with Indonesia steaming ahead on seventh place, and like Malaysia was on the 14th spot in 2014.

Global foreign direct investment (FDI) flows in 2015 surged by 38 per cent to $1.76 trillion, the world’s highest level since the global economic and financial crisis of 2008 — 2009, UNCTD said, adding that the growth rode on the increase of cross-border mergers and acquisitions (M&As) to $721 billion, nearly 67% higher than the $432 billion in 2014.

Inward FDI flows to developed economies reached $962 billion, the UNCTD said.

“As a result, developed economies tipped the balance back in their favour with 55% of global FDI, up from 41% in 2014. Strong growth in inflows was reported in Europe. In the United States FDI almost quadrupled, albeit from a historically low level in 2014.”

Developing economies drew $765 billion of FDI inflows, or 9% higher than in 2014, as said economies continue to compose half of the top 10 destinations of FDI flows.

Developing Asia remains the largest FDI recipient region globally, with inflows amounting to $541 billion, or a 16% increase.

Going forward, UNCTD expects FDI flows to decline around 10%-15% this year, mirroring the “fragility of the global economy, persistent weakness of aggregate demand, sluggish growth in some commodity exporting countries, effective policy measures to curb tax inversion deals and a slump in MNE profits.”

Growth is expected to get back on track in 2017, with UNCTD predicting FDI flows to go beyond $1.8 trillion in 2018. — Roy Stephen C. Canivel