Tougher competition from Asian neighbors?

THE PHILIPPINES will have to contend with growing competition posed by other Asian investment sites given the trend of more liberal policies in the region.

Countries like China, South Korea, Japan and Malaysia have offered more incentives or signed treaties to uphold contract rights amid the global economy’s recovery, a United Nations study that monitored investment measures imposed from Oct. 1 to Jan. 15 found.

Many Latin American economies, in contrast, have increasingly restricted the entry of foreign direct investment (FDI) and even expropriated private firms, states the UN Commission on Trade and Development’s (UNCTAD) Investment Policy Monitor that was released over the weekend.

“As in previous review periods, the majority [of the policies] relate to investment liberalization, facilitation and promotion,” the report states, noting that many were adopted in Asia and Africa.

China, for instance, was cited for recently allowing foreign investors to hold full ownership of hospitals in the mainland. International treaties, meanwhile, were signed by Japan, Korea, Saudi Arabia and Malaysia to uphold the rights of foreign investors and even prohibit double taxation in some cases.

Japan was further cited for reducing its corporate tax rate by 5% to 35%, as was Korea for “extending foreign direct investment zones for the services sector.”

The report also noted the United Arab Emirates’ establishment of a 420-square kilometer industrial zone, said to be one of the largest in the world, where foreign businesses will enjoy full ownership of their ventures.

“But there have also been some important instances of investment restrictions, including expropriation, particularly in parts of Latin America,” the report added.

The government in Ecuador, for instance, has taken over the oil fields run by a Brazilian company while Venezuela did the same to land owned by agricultural firm Agroislena during the monitoring period.

The Venezuelan government also reportedly took over a fertilizer producer partly owned by Italian and American investors and a US-owned glass manufacturing firm.

Nationalization also went on in Bolivia where the government decided to replace two foreign-owned funds that comprised the country’s pension system.

“Proactive and considerate investment policymaking is even more important in light of today’s global investment trends,” the report stated, noting earlier UNCTAD reports that global FDI flows stagnated in 2010.

The Philippines recorded a 36.5% drop in net FDI to $1.1 billion in January to October from yearago levels, latest central bank data show.

The Board of Investments, however, is aiming to lure in $3.5 billion worth of FDI for 2011 and has announced plans to target firms in alternative markets like China and Southeast Asia. Quick fixes to the country’s investment climate were also promised.

“While industrial production and trade have recovered to the pre-crisis levels, FDI is lagging behind and policy makers need to identify the ways and means of encouraging private investment so as to sustain economic recovery in years to come,” the report stated. –JESSICA ANNE D. HERMOSA, Senior Reporter, Businessworld