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Foreign Direct Investment in the Philippines: A Reassessment

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  • Aldaba, Rafaelita M.

Abstract

Recognizing the importance of an outward-oriented policy approach, countries such as Malaysia, Indonesia, Thailand and the Philippines have liberalized their regulation on foreign direst investment by introducing various guarantees and incentives. The Philippines, however, lagged behind its neighbors. This study identifies the factors that may explain why the Philippines has failed to capture its share of FDIs. Analysis indicates that our trade policy being strongly for import substitution has contributed to the rather unimpressive direct investments. The high level of protection in the manufacturing industry though inappropriate has encouraged the setting-up of local production that resulted to resource misallocation and loss of consumer welfare. In fact, FDI flows in the country have been concentrated in the following highly protected industries: chemicals, processed food, transport equipment, machinery and appliances, textiles and garments, basic metal products and petroleum and coal. Regression results support a positive relationship between FDI and the level of protection, stock of public investment real gross domestic product and real effective exchange rate.

Suggested Citation

  • Aldaba, Rafaelita M., 1994. "Foreign Direct Investment in the Philippines: A Reassessment," Research Paper Series RPS 1994-10, Philippine Institute for Development Studies.
    • Handle: RePEc:phd:rpseri:rps_1994-10
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    1. repec:phd:pjdevt:jpd_1998_vol__xxv_no__1-b is not listed on IDEAS
    2. Medalla, Erlinda M. & Austria, Myrna S., 1996. "A Study on the Trade and Investment Policies of Developing Countries: The Case of the Philippines," Discussion Papers DP 1996-03, Philippine Institute for Development Studies.
    3. Mr. Nigel A Chalk, 2001. "Tax Incentives in The Philippines: A Regional Perspective," IMF Working Papers 2001/181, International Monetary Fund.
    4. Austria, Myrna S., 1998. "The Emerging Philippine Investment Environment," Discussion Papers DP 1998-27, Philippine Institute for Development Studies.
    5. Ma. Laarni D. Revilla, 2016. "Cross-country Econometric Study on the Impact of Fiscal Incentives on FDI," Working Papers id:11472, eSocialSciences.
    6. Revilla, Ma. Laarni D., 2016. "Cross-Country Econometric Study on the Impact of Fiscal Incentives on Foreign Direct Investment," Discussion Papers DP 2016-17, Philippine Institute for Development Studies.
    7. Revilla, Ma. Laarni D., 2016. "Cross-Country Econometric Study on the Impact of Fiscal Incentives on Foreign Direct Investment," Research Paper Series DP 2016-17, Philippine Institute for Development Studies.

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