FDI: What we got are crumbs

Last week, the Bangko Sentral ng Pilipinas (BSP) reported that the net inflow of foreign direct investments (FDI) soared 70 percent to $1.2 billion in August compared to the same month last year. This happens to be the highest level in 16 months.

“This reflected continued favorable investor sentiment on the Philippine economy on the back of the country’s strong macroeconomic fundamentals,” the BSP added. However, despite this remarkable performance in August, FDI for the first eight months declined by 5.2 percent to $5.11 billion from $5.38 billion in the same period last year.

While such decline is still bearable and the entire performance is still noteworthy, when compared with other countries in the ASEAN (like that of Vietnam which raked in $10.3 billion in FDI inflows in the same period), what we got are crumbs. Not only that. While our FDI inflows in January-August declined by 5.2 percent, Vietnam increased by 5.1 from the same period in 2016.

Critics may swiftly conclude that this is probably because of how President Duterte runs the country. That most likely, the first world countries might have discouraged their wealthy citizens, our potential foreign investors, from investing here. Thus, we are lagging behind in attracting FDIs.

This perception, however, is unfounded. Historical data will help us sort this out. As reported by the World Bank through the East Asia Pacific Economic Update earlier last year, the ASEAN region, has been the largest recipient of FDIs in the Asia Pacific region. However, since 1952 until 2012, “Singapore accounts for more than half of the total FDIs to the whole region at 52 percent. Thailand ranks 2nd with 13 percent, followed closely by Indonesia at 3rd with 11 percent, at 4th is Malaysia with 10 percent, Vietnam (the once war-torn country) ranks 5th with 8 percent, and the Philippines is 6th with a miserable 3 percent.”

Likewise, a report from the United Nations Conference on Trade and Development confirmed this. From 1980 to 2013, the country accumulated the lowest amount of FDI ($362 billion) when compared to Singapore ($6.4 trillion), Thailand ($1.5 trillion), Malaysia ($1.3 trillion), Indonesia ($1.1 trillion), and Vietnam ($591 billion).

Worse for us, lately, communist country Vietnam (remember, communism hates capitalism) made more policy changes by raising foreign ownership from 49 percent to as high as 60 percent on some previously controlled industries. Good enough for foreigners to take control of their investments or businesses. Notably, this is part of their continuing efforts to attune their policies to the constantly changing global investment climate to attract more FDIs.

Therefore, what is really more important is for our leaders to listen to some business groups’ venerable plea to ease constitutional restrictions on foreign ownership in certain industries. Remember, our constitution limits foreign ownership to 40 percent in some undertakings and in land ownership. Most of these undertakings usually involve natural resources and public utilities. These restrictions are clearly manifested in the Foreign Investments Negative List. This is a list of all business activities where foreigners are either restricted or banned.

It is not a hopeless situation though. To recall, President Duterte signed Executive Order No.10 creating a 25-member body that would study proposals to amend the 1987 Constitution. In signing such executive order, he emphatically stressed that, “There is a need to review the 1987 Philippine Constitution to ensure that it is truly reflective of the needs, ideals and aspirations of the Filipino people and to ensure that the mandate of the people as expressed thereon, is responsive to changing times.”

Moreover, it was so refreshing to note that, a few weeks ago, while other parts of the country and of the globe were so busy coping with terror and its consequences, Socioeconomic Planning Secretary Ernesto M. Pernia told reporters on the sidelines of the 2017 International Conference on Sustainable Development Goals Statistics that “the government plans to liberalize nearly all industries by 2019.” “It can be done through an amendment of the Constitution to be pushed in Congress next year,” he added.

Expectedly, “mass media and almost every sector except land ownership (which shall come by way of a 50-year lease and renewable for another fifty years) will be further opened up to foreign investors,” he said. Enthusiastically, with these amendments, “foreign direct investment inflows could easily double,” he further said.

Apparently, therefore, what is important right now is for all the players (President Duterte and our lawmakers) to make true their commitments in amending some economic provisions of our constitution. After all, there is nothing wrong with change, if it is for the better. Otherwise, we shall continue to get crumbs.