THE country’s domestic investment has been declining since 2001, according to data provided by state-owned think tank Philippine Institute for Development Studies (PIDS).

PIDS president Dr. Josef Yap said in a presentation that based on available data, the country’s gross domestic investment (GDI) as a percentage of gross domestic product (GDP) has been on the decline since 2001.

“There is a need to revive private investment by improving infrastructure and strengthening institutions by promoting good governance,” Yap explained.

Data provided by Yap said that after GDI increased to 21.2 percent of GDP in 2000 from 19 percent in 1999, GDI already started a gradual decline. In 2001, the country’s GDI decreased to only 19 percent of GDP.

After 2001, GDI continued its downward trend to 17.7 percent of GDP in 2002, 16.8 percent in 2003, 16.7 percent in 2004, 14.4 percent in 2005, and 13.8 percent in 2006.

While the Philippines posted double-digit GDI relative to GDP, other Asian neighbors posted relatively higher GDI. Indonesia, for example, has posted above 20 percent of GDI as a percentage of GDP starting in 2000.

The Republic of Korea has posted a GDI of above 29 percent of GDP since 2000; Malaysia, above 20 percent since 2000; and Thailand, above 22 percent since 2000.

Apart from the need to address the country’s infrastructure constraints, there is a need for the Philippines to take advantage of “green shoots” that could encourage more domestic and foreign investment to flow back into the country.

“You have green shoots, but if these green shoots are not managed properly, it will turn into weeds,” Yap said.

One of these opportunities lies in regional rebalancing. Yap said that due to the contraction in exports and imports, which mostly go to or are sourced from Western countries, there is a need to look more into enhancing intraregional trade.

He also said that there is a need for the Philippines to cooperate in reviving the “flying-geese model” which will turn even middle-income countries to become production hubs for the region and turn Japan, Korea and China into major markets.

Yap said the production hubs will start producing more wage goods rather than luxury goods. This arrangement will also spur domestic investment in many Asian countries like the Philippines.

He said that regional rebalancing will also help small and medium enterprises (SMEs) in the country. This will open up opportunities for SMEs by creating new production networks.