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Business and Economic Update
Issue 02

Net inflows of FDI

We check the amount of Foreign Direct Investments (FDI) that have come to these four groups of economies – the G7 industrialized countries, North Asia, South East Asia, and the three other economic partners of the ASEAN. Main data source in the succeeding tables is the UN Conference on Trade and Development (UNCTAD) investment stats and the World Investment Report (WIR) 2015, released in late June 2015.

Notice the consistent net outflows (or negative inflows) of capital in the G7 except UK and partly, Canada. Then in Hong Kong, Taiwan, S. Korea and Malaysia.

Table 1. FDI net inflows, 2012-2014, in billion US dollars

Source: UNCTAD, http://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Annex-Tables.aspx

The Philippines is not getting enough FDI inflows compared to its five other neighbors in the ASEAN, even compared to late-comer Vietnam. There are a number of reasons for this, like our protectionist Constitution that restricts or prohibits foreign capital in certain sectors and sub-sectors of the economy, our expensive cost of electricity, governance issues and so on.

While these issues require medium- to long-term solutions, there are also a number of good factors that make the Philippines attractive to more foreign investors recently. Notice for instance the three-fold increase in FDI inflows in two years from 2012 to 2014.

Countries may experience persistent FDI net outflows for several years, but it does not mean that there is Countries may experience persistent FDI net outflows for several years, but it does not mean that there is “decapitalization”. Capital and investments come via other avenues like the stock market, foreign exchange market and the credit market.

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