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Presentation Outline. FDI policy Investment incentive program FDI trends & distribution by sector FDI performance. FDI policy reforms. Foreign Investment Act 1991. List A. reserved for Filipinos due to Constitutional constraints: mass media, cooperatives, small-scale mining.

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Presentation outline

Presentation Outline

  • FDI policy

  • Investment incentive program

  • FDI trends & distribution by sector

  • FDI performance


Fdi policy reforms

FDI policy reforms

Foreign Investment Act 1991

List A

reserved for Filipinos due to Constitutional constraints: mass media, cooperatives, small-scale mining

reserved for Filipinos due to health, defense, & moral reasons; protection of SMEs

List B

List C

areas where adequate number of firms exist to serve the economy


Fdi policy reforms1

FDI policy reforms

Foreign Investment Act 1996

  • retail trade liberalization (March 2000) allows 100% FDI with minimum equity US$7.5million

  • Foreign Bank Liberalization (1994): 10 new foreign banks

  • rural banking completely closed to FDI

  • restrictions on licensed professions, pyrotechnics & firecrackers; ceilings on financing, advertising, domestic air transport, commercial deep sea fishing

List A

List B

  • restricts to 40% FDI in firms engaged in national security, defense, public health & safety & non-export firms with less than US$200,000 capital


Remaining fdi restrictions

Remaining FDI restrictions

  • Land ownership

    - lease for 50 years, renewable once for another 25 years

  • BOT projects

    - foreign ownership limited to 40%

  • Omnibus Investments Code

    - for incentives linked with export performance, export requirements for foreign firms are higher (70%) than domestic firms (50%)


Tax other fiscal incentives to fdi

Tax & other fiscal incentives to FDI

FDI Incentive Regimes

Subic Bay

Metropolitan

Administration

Clark

Development Corporation

Board of

Investments

Philippine Export

Processing Zone

  • 1987 Omnibus Investments Code

  • 1995 Special Economic

  • Zone Act

  • 1972 Export Processing Zone Authority

  • 1993 Clark Development Corporation

  • 1992 Bases Conversion & Development Act


Fdi incentives

FDI Incentives

National & local taxes: gross receipts tax, VAT, ad valorem, excise, real property tax

Allowable deductions: direct salaries, wages, production supervision salaries, raw materials, supplies & fuels, goods in process, depreciation, rent, utility charges, financing charges


Approved fdi by agency

Approved FDI by Agency


Fdi trends

FDI Trends


Fdi gdp growth

FDI & GDP Growth


Fdi as of gdp

FDI as % of GDP

Average FDI/GDP

0.54% 1980s

1.21 1990s

1.7 20s


Fdi distribution

FDI Distribution

50

45

34

32

31

11

15

18

6

0.9

12

8

8

5

3

6

5

1

Food mfg

9%

15%

Mfg: electronic components assembly, food, transport, chemicals, petroleum & coal, basic metal

Public Utilities: telecommunications


Fdi sources

FDI Sources

56

25

21

22

22

15

12

12

5

8

6

6

6

7

5

3

4

5

3

2

0.5


Comparative performance

Comparative Performance


Comparative performance1

Comparative Performance


Competitiveness indicators country rankings

Competitiveness Indicators:Country Rankings

Source: World Economic Forum, Global competitiveness Report, 2003-2004 (102 countries)

Macro: macro stability, country credit risk, wastage in government expenditures

Public institution: enforcement of contracts & law, degree of competition


Cost of doing business indicators

Cost of Doing Business Indicators

Source: World Bank, World Development Indicators, 2004.


Utility costs

Utility costs

Source: MIGA & World Bank, FDI Competitiveness in Asia, 2004.


Real estate costs

Real estate costs

Source: MIGA & World Bank, FDI Competitiveness in Asia, 2004.


Corporate tax rate

Corporate tax rate

Source: The Economist Intelligence Unit (2004)


Tax incentives selected se asian countries

Tax Incentives:Selected SE Asian Countries

Sources for Malaysia, Thailand, Indonesia, & Vietnam: Chalk (2001) & PWH Coopers (2001) as cited in Fletcher (2002)


Tax incentives selected se asian countries cont d

Tax Incentives:Selected SE Asian Countries (cont’d)


Adb wb survey in the philippines major constraints to business

ADB-WB Survey in the Philippines: major constraints to business

General Findings (domestic & foreign firms)

  • Macro instability

  • Corruption

  • Electricity

  • Tax rates

    Foreign firms

  • Customs regulations

  • Telecommunications

  • Labor regulations

  • Crime

  • Labor skills


Broad conclusions

Broad Conclusions

  • FDI liberalization & changes in incentive policy crucial in FDI improvements

  • Competition for FDI resulted in a complex investment incentive system

  • Overall FDI performance has lagged behind the country’s neighbors

  • Tax incentives were not able to compensate for the relatively weak fundamentals and poor investment climate


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