‘Restrictions hamper FDI growth’

The country’s restrictions in foreign ownership and investment in key sectors of the economy are among the most stringent in Asia, the World Bank said.

Dr. Rogier van den Brink, World Bank lead economist for the Philippines, said these restrictions are among the factors that hamper the growth of foreign direct investments (FDI) in the country.

In a forum discussing strategies on how the Philippines can catch the next wave of investments on Friday, van den Brink presented the latest data from the World Bank’s Investing Across Borders study to compare the level of foreign-ownership equity in the country with those of its regional neighbors in key sectors.

The data from the study presents indexes with values from 0 to 100, where 100 denotes the absence of statutory ownership restrictions to FDI, while 0 means foreign companies are not allowed to own equity in a sector or sectoral group.

The index scores refer to the percentage of share foreign firms may avail themselves of in a business in a particular sector.

The data revealed that the Philippines—compared to other regional economies, such as Malaysia, Vietnam, Indonesia, South Korea, China, Japan, Thailand and Singapore—allows the lowest foreign-equity ownership in key sectors.

Specifically, the Philippines has restrictive foreign-

ownership rules on the following economic sectors: telecommunications, electricity, transport, banking, light manufacturing, mining, oil, gas and agriculture and forestry compared to its neighbors in the region.

In telecommunications, the Philippines’s score in allowable foreign participation is 40, coming in at the penultimate place and lagging behind Vietnam, China, the Republic of Korea, and Indonesia, which allows 49 percent, still a minority stake, to foreign-owned companies.

For the electricity sector, permitted foreign participation for the Philippines is higher with a score of 65.7, but is still considered the third-lowest in the region, with Vietnam, China, Japan and Singapore, among others, allowing 70-percent to 100-percent full foreign ownership in businesses engaged in the electricity sector.

The Philippines comes in as the second-most restrictive country as well in the transport and light-manufacturing sectors, with 40-percent and 75-percent foreign ownership, respectively.

Japan, South Korea, Malaysia and Singapore allow 100-percent foreign ownership in light manufacturing, while Thailand grants 87.5-percent foreign participation.

The country is still at the lower end of the spectrum in the banking sector, at 60-percent foreign-equity ownership, only ahead of Malaysia and Thailand.

The Philippines’s mining, oil and gas and agriculture and forestry sectors permit the least foreign ownership in the region at only 40 percent.

Because of these restrictions, van den Brink said the Philippines is only capturing 6 percent of the Southeast Asian FDI inflows from 1995 to 2012.

FDI for the Philippines are expected to be 24 percent higher than the estimated $2.1 billion by the end of 2013, or at $2.6 billion.

Van den Brink reiterated the call of foreign business chambers in his policy recommendation, which proposes more relaxed restrictions on FDI.

“This will really send a signal that the Philippines is open for business. A review and reduction of the foreign-investment negative list are recommended,” van den Brink said. –Catherine N. Pillas, Businessmirror