Outlook

Foreign investments steeply fall under Aquino

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Foreign direct investments into the Philippines during President Aquino’s first two years in office have steeply fallen, putting the country only a notch above Cambodia as the least-favored site in East Asia for offshore investors.

The annual average inflow of net foreign direct investments (FDI) under Mr. Aquino amounted to only $1,367 million, compared to the $2,171 million under Gloria Macapagal-Arroyo’s watch from 2005 until June 2010, and the $1,746 million during Joseph Estrada’s years. These figures are from the United Nations Conference on Trade and Development and the World Bank.

Table 1: AQUINO’S THE SMALLEST Foreign Direct Investments Inflow

Annual Average $ M

1998-2000 (Estrada)    1,746

2005- 1H 2010 (Arroyo)         2,171

2H 2010 – 1H 2012 (Aquino)     1,367

Source: Unctad, World Bank

The 2001 to 2004 FDI figures aren’t used for comparison because of the abnormal slowdown of global capital movements right after the 9/11 terrorist assaults on the World Trade Center, and the US invasion of Iraq that started 2003.  As shown in Table 2, however, the Philippines even during the global financial crisis from 2008 to 2009—considered worse than the 1920s Great Depression—still attracted substantial foreign capital under Macapagal-Arroyo’s watch. During the politically volatile 2006-2007 years when the opposition threw everything but the kitchen sink to overthrow Macapagal-Arroyo, FDI inflows were even the highest in our history, nearly reaching $3 billion annually. In contrast, FDI flows have fallen during Mr. Aquino’s first two years in office, when there’s a robust global economy and feeble opposition against him.

Table 2: DOWN WE GO

Foreign Direct Investments Inflow: $ M

2001 (9/11 attack)     195

2002    1,542

2003  (Iraq invasion) 491

2004    688

2005  (Hyatt 10 plot) 1,854

2006    2,921

2007    2,916

2008 (Global Financial Crisis)        1,544

2009    1,963

2010 (May elections)   1,298

Jan-June (Arroyo)      744

July-Dec (Aquino)      554

2011    1,262

2012 Jan-June          917

Especially here, the level of FDI flows is a crucial barometer of the economy’s prospects, since it is a surrogate indicator for all business activity, with other reports such as “approved investments” tallied by the Board of Investments and “Business Expectations”  notoriously inflated.

Mr. Aquino’s main focus—a shrill anticorruption rhetoric and persecuting Mrs. Arroyo, Ombudsman Merceditas Gutierrez, and Chief Justice Renato Corona—obviously has not helped make the country attractive to FDI. Under Mr. Aquino’s watch (Table 3), we have been overtaken by miles by Indonesia, Thailand and by socialist Vietnam. This is despite their lower proficiencies in English, the lingua franca of global business, and their less-sophisticated corporate sectors. Cambodia, one of the most backward and poorest country in Asia, is now breathing down our necks. Cambodia can overtake us soon, if China succumbs to the temptation of putting us down and throws a billion yuan into it just so we get listed as the country with the least FDI in the region.

AT THE BOTTOM

Foreign Direct Investments $ B

July 2010 – June 2012

Indonesia      34.8

Vietnam        15.4

Thailand       19.1

Vietnam        15.4

Philippines    2.7

Cambodia       2.3

It’s not at all puzzling why FDI flows have fallen under Mr. Aquino. China has become the fifth-biggest foreign investor in the world, with its FDI outflows surging from just $3 billion in 2002 to $70 billion last year, with Indonesia, Vietnam and Cambodia getting $20 billion. But Mr. Aquino has been antagonizing China, first by refusing to persecute his officials who bungled the Luneta hostage crisis in which eight Hong Kong tourists were killed. After that he sends a warship, even if a doddering hand-me-down from the US Coast Guard, to the disputed Scarborough Shoal, to shoo away Chinese fishermen. Then he continuously ramps up his tirades against the “neighborhood bully”—to the delight of the Americans.

The Europeans? They see us now as a nation where contracts aren’t honored after Mr. Aquino unilaterally junked the Belgians’ $500-million Laguna Lake dredging project and the French companies’ port and bridge-building contracts, with him even calling them corrupt. The Americans, of whom we have been acting as little brown brothers under Mr. Aquino’s administration? Like iconic US firms Apple, GE, Avon, Intel, they’ve moved or are moving to China—and Vietnam.

The weak FDI flows into our country indicate a crisis of global confidence in our economy’s prospects, which our leaders should address immediately before it leads to an irreparable economic collapse. Sadly, high popularity ratings, thanks to a servile, uncritical media, can make any president oblivious to a looming crisis.

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