FDI flows seen rising; ‘green’ ventures urged

INVESTMENT FLOWS into the Philippines and the rest of Asia will likely strengthen this year but governments are advised to favor low-carbon projects to address climate change amid the expected surge in economic activity, a United Nations agency said in a report released yesterday.

Local experts agreed the Philippines could enjoy an increase in foreign direct investments (FDI) but stressed the country would have to improve its attractiveness.

“Inflows to the region (South, East and Southeast Asia) dropped by 17% to $233 billion in 2009 … But inflows to the region as a whole are likely to rebound in 2010 and continue to grow in 2011,” the 2010 World Investment Report by the UN Conference on Trade and Development (UNCTAD) states.

“Prospects for FDI inflows are improving as the region has been leading the recovery of the global economy and TNCs continue to give priority to the region in their FDI plans,” the report stated further.

This will be a stronger showing than the report’s global FDI flow forecast of a 7.7% growth to $1.2 trillion in 2010, which won’t be enough to make up for a 37% plunge last year.

The Philippines will likely share in the upbeat projection for the region, business groups and economists yesterday said, but it should focus instead on getting a larger share of the pie.

“FDI flows have been fairly robust in the Philippines despite the crisis,” Philippine Institute for Development Studies President Josef T. Yap said.

“But you have to remember that the Philippines just gets a small share.”

Net FDI into the country grew by 46.2% to $1.806 billion in 2009 after plummeting by 36.6% in 2008, official data show. The Philippines managed to attract $1.52 billion worth in 2008, or 2.5% of what flowed into 10 economies that year, according to data from the Association of Southeast Asian Nations Web site.

American Chamber of Commerce of the Philippines senior adviser John D. Forbes said FDI growth this year could be driven by a pickup in demand for electronic components and business process outsourcing services — areas where the Philippines claims a niche.

European Chamber of Commerce of the Philippines Executive Vice-President Henry J. Schumacher concurred, saying in a text message: “The country will benefit but it will not get a significant share unless the economy is opened more to foreign investors…”

The report went on to advise governments to keep in mind commitments for climate protection amid the expected surge in investments.

“UNCTAD proposes a global partnership to synergize investment and climate change policies to promote low-carbon foreign investment,” it states.

“This includes developing conducive host-country policy frameworks including market-creation mechanisms and implementing promotion programs to attract low-carbon investment with key functions being investor targeting, fostering linkages and investment aftercare.”

The Philippines already grants incentives such as income tax holidays to “green projects” that reduce carbon emissions under the 2010 Investment Priorities Plan.

Local experts, however, said more must be done than just encouraging environment-friendly projects.

“A sanguine picture of free investment is well and good. But the threat of climate change is too terrible and destructive that the rigor of democratic intervention must come in. We urge developed countries to cut deep and early [their carbon emissions],” Climate Change Commission Executive Director Heherson T. Alvarez said at the event.

University of the Philippines public administration professor Leoner M. Briones likewise said investment policies “are just a part of a bigger issue on how to deal with climate change.” — Jessica Anne D. Hermosa, Businessworld