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THE
country continues to be among the world’s poorest
foreign direct investment (FDI) performers, according to
the World Investment Report 2006 recently released by
the United Nations Conference on Trade and Development (Unctad).
The
report showed that the country’s ranking in the Inward
FDI Performance Index has been slipping. In 2004 the
country was ranked 103rd, but in 2005 it was ranked
115th. The
Philippines’
rankings in recent years have been very low compared
with its 28th-place ranking in 1990.
In terms
of the Inward FDI Potential Index, the country’s ranking
also continued to decline from the 60th place in 2003 to
the 61st place in 2004. The Unctad did not include yet
data on the 2005 rankings for all 141 economies.
The
Philippines was included in the list of countries
considered performing below potential in FDI performance
but with high FDI potential. The list includes Algeria,
Argentina, Austria, Belarus, Brazil, Canada, Denmark,
France, Germany, Greece, the Islamic Republic of Iran,
Israel, Italy, Japan, Kuwait, Libyan Arab Jamahiriya,
Mexico, Norway, Oman, Republic of Korea, Russian
Federation, Saudi Arabia, Switzerland, Taiwan Province
of China, Thailand, Tunisia, Turkey, Ukraine, the United
Kingdom and the United States.
The
report showed that FDI inflows into the country fell
under the range of $1.0 billion to 9.9 billion, and
around $0.1 billion to 0.9 billion-worth of FDI
outflows.
The
Unctad said the top performer in the FDI index was
Azerbaijan due to large investments in its oil and gas
industry. The other countries who made the top five FDI
performers were Brunei Darussalam,
Hong Kong-China,
Estonia
and Singapore.
“Among
the top 20 performers by the index, 12 were developing
economies and three were from the transition economies
of
Southeast Europe and the CIS [Commonwealth of Independent States]. Many
high performers are oil- and gas-producing economies,”
Unctad said.
In the
South, East and
Southeast Asia and
Oceania regions, FDI inflows reached a new high of $165 billion in
2005. The region is becoming increasingly attractive to
market-seeking FDI. Furthermore, the report stated,
transnational corporations’ (TNC) investments in
financial services and high-tech industries are growing
rapidly.
However,
FDI outflows from the region declined to $68 billion in
2005. The report said this was due to the decline in
outward investments from some Asian newly
industrializing economies (NIEs). But outflows from
China increased sharply and helped change the pattern of
outward FDI in the region.
“China,
Hong Kong [China] and Singapore retained their positions
as the largest recipients of FDI in the region, while
China emerged as a major outward investor,” Unctad said.
China
was in a class of its own in terms of FDI inflows which
amounted to $50 billion, but it joins other Southeast
Asian countries in the range of $10 billion to $49
billion worth FDI outflows.
The
report also cited several major investments of
transnational companies originating from developing
countries in the region. These include the acquisition
of Wind Telecominicazioni of Italy worth $12.8 billion
by the Weather Investment of Egypt, the acquisition of
the PC section of IBM by China’s Lenovo through its Hong
Kong affiliate for $1.8 billion, and San Miguel Corp’s
acquisition of Australia-based National Foods Ltd. for
$1.5 billion.
This
placed San Miguel in the 97th rank in the list of
cross-border M&A deals with values of over $1 billion
completed in 2005. There were 141 deals listed.
“More
than 90 percent of FDI inflows into developed countries
originated in other developed countries. But in terms of
stock, investments from developing countries in
developed countries have been on the rise over the past
decade, and their share in 2004 surpassed the level
reached in 1990,” the report stated.
Apart
from a few larger contract manufacturers, the vast
majority of investments are relatively small companies
or less well-known, as they may be a part of larger
groups. These include DA Corp. (electronic components,
Republic of Korea), HTC27 (mobile phones, Taiwan
Province of China), and Ayala-owned Integrated
Microelectronics Inc.
The
Unctad said major outward FDI from developing and
transition economies are important sources of FDI in
agriculture, accounting in 2004 for 17 percent of the
world total. Investments in mining, quarrying and
petroleum remain at a low level from a global
perspective.
However,
this situation seems to be changing as a result of the
increased demand for natural resources by companies in
such economies as China, India and the Russian
Federation.
In
manufacturing, developing and transition economies have
made inroads into such industries as electrical and
electronic equipment (with a 7.8-percent share of global
outward FDI stock in this industry in 2004), nonmetallic
mineral products ( 4.3 percent) and rubber and plastic
products (3.7 percent).
In
services, the shares of developing and transition
economies in the global outward FDI stock are
particularly high in trade (15 percent), business
activities (14 percent), construction (12 percent),
hotels and restaurants (9 percent), and transport,
storage and communications (8 percent).
Meanwhile, the survey also included Unctad’s survey of
changes in national FDI policies suggests that countries
in South, East and South-east Asia continue to open up
their economies to inward FDI.
Significant steps in this direction were taken in 2005,
particularly in services. Unctad said several countries
also streamlined administrative procedures and
introduced new incentives to encourage more investment.
A few
measures also aimed at securing greater benefits from
FDI, or addressing concerns over crossborder mergers and
acquisitions. In terms of policies on outward FDI, some
governments in the region continued to remove barriers
or to strengthen support to the international expansion
of domestic firms.
Most of
the changes in 2005 made conditions more favorable for
foreign companies to enter and operate. The types of
measures most frequently adopted were related to
sectoral and cross-sectoral liberalization (57 policy
changes), promotional efforts (51 policy changes),
operational measures (22 policy changes) and FDI
admission (19 policy changes).
Rate
reductions were most significant in
Europe, where especially the new EU members continued to revise
their corporate tax laws.
However,
tax increases have been the exception, and were only
seen in the Dominican Republic which increased tax rates
to 30 percent from 25 percent; Equatorial Guinea, 35
percent from 25 percent; Lithuania, to 19 percent from
15 percent; and the Philippines to 35 percent from 32
percent.
Unctad
said that in the context of FDI and development, there
are important interactions between corporate strategies
and public policies at the national and international
levels.
“The
rise of FDI from developing and transition economies is
no exception. Proactive government policies can help
countries—be they sources or recipients of such
investment—to benefit from such investment activity,”
the report stated.
By
providing the appropriate legal and institutional
environment, the report stated that home-country
governments can create conditions that could induce
their firms to invest overseas in ways that could
benefit the home economy.
Host-country policies, the Unctad said, can also affect
the volume and net impact of inward FDI from developing
and transition economies.
The
emergence of TNCs from these economies as key regional
or global players in their industries is paralleled by
important changes in policies governing FDI and related
matters. |
