Imagine you are the president of a country that is facing political turmoil, economic challenges, and international scrutiny. How do you balance the need for foreign direct investment (FDI) to boost your economy and the challenge of political instability that may deter such investment? This is the dilemma President Bongbong Marcos Jr. (PBBM) is facing right now.
Sifting through the opinion pages of our local papers for illumination has only led to complications. Take Philstar, for example. Ambassador B. Romualdez column The country is gearing up for more investments runs counter to Ana Pamintuan column Spooking investors.
Quoting PBBM’s economic team, Romualdez asserts, “The Philippines has become a premier investment destination for foreign businesses in Asia.” On the flip side, Pamintuan stresses, “Surely Marcos recognizes that the political turbulence and uncertainty can only spook foreign investors.”
Let’s analyze the dilemma equation.
The left side of the equation – the need for FDI – Pamintuan spelled out:
"Official statistics of the Association of Southeast Asian Nations show that in 2022, Singapore drew more than half of all FDI to ASEAN, amounting to a whopping $141.2 billion. Indonesia came next, accounting for 9.8 percent of total FDI in the region. Vietnam, which drew 7.9 percent, overtook Malaysia (7.6).
“Singapore, Indonesia, and Cambodia registered FDI growth of 7.7, 4.7, and 2.7 percent, respectively, in 2022.
“In contrast, Brunei saw the biggest drop of over 200 percent, followed by Laos (-40.7 percent), Thailand (-26 percent), and the Philippines (-21.8).”
On the other hand, the right side of the equation – the challenge of political instability – Manila Standard Lito Banayo jeers in his column Nakakaloka:
“[O]ur unstable policies that flip and flop with every change of government in our politics-crazy country, is the real reason why these much-needed foreign investors come to say 'hello' and the day after, 'goodbye'.”
To help us get to the bottom of this dilemma, I called upon an “outsider” – an unbiased observer looking through and thinking outside the box – to answer questions from televiewers in our live TV program about this complex topic.
ME Good day everyone! Welcome to PoliTik Talk, your TV show that delves into the hot political topic of the day: PBBM’s dilemma on how to balance the need for foreign investment and the challenge of political instability. Today, we have a special guest who will shed light on such a complex topic. Help me welcome Mr. AI, a geopolitical expert.
MR AI Thank you for having me on your show. I’m looking forward to answering your questions and sharing my insights on your president’s dilemma.
ME Thank you too for joining us, Mr. AI. Let’s start with the basics. Why is foreign direct investment (FDI) important for the country?
MR AI FDI can bring many benefits to the Philippines, such as economic growth, employment, technology transfer, and market expansion. However, FDI can also pose risks and costs, such as crowding out of domestic firms, profit repatriation, environmental degradation, labor exploitation, political interference, and cultural erosion. It is important for the Philippines, but it also requires careful management and regulation.
ME I see. As to our country’s political stability, how does it affect the FDI?
MR AI Political stability is the degree of certainty and predictability of the political system, institutions, policies, and outcomes in a country. [World Justice Project Rule of Law Index: among 142 countries PH ranked 100th, among 15 East Asia & Pacific countries PH ranked 13th w/ Myanmar and Cambodia at rock bottom]. Political stability can affect FDI by increasing the attractiveness and confidence of foreign investors. However, the correlation between FDI and political stability is not constant, and it can vary across different countries, sectors, and periods.
ME Can you give us some examples of countries where FDI has had different effects on political stability?
MR AI Sure. For example, Ghana, Myanmar, and China are three countries that have experienced different effects of FDI on their political stability, depending on the nature, extent, and spillover effects of the investment.
In Ghana, FDI in the mining sector has contributed to economic growth, employment, and social development, while also enhancing the transparency and accountability of the government and the mining companies.
In Myanmar, FDI in the oil and gas sector has been linked to land confiscation, forced displacement, and armed conflict, while also enabling the military regime to resist democratic reforms and suppress civil society.
In China, FDI has played a significant role in the country’s economic transformation, technological upgrading, and global integration, while also posing challenges to the political system, social cohesion, and environmental sustainability.
ME Wow, that’s very interesting. We have a question from our televiewer: What about trade openness? How does it influence the relationship between FDI and political stability?
MR AI Trade openness is the degree to which a country allows the free movement of goods, services, and capital across borders. Trade openness can have positive effects on FDI, as it can enhance the country’s competitiveness, market access, and integration with the global economy. Trade openness can also reduce the political risks and uncertainties that foreign investors face, and thus make them more willing to invest in politically unstable countries.
However, trade openness can also entail costs, such as increased exposure to external shocks, competition, and inequality, which can undermine political stability and social cohesion.
ME How does the Philippines fare in terms of trade openness?
MR AI The Philippines has a moderate level of trade openness [World Bank: among 169 countries PH ranked 96th, among 9 Southeast Asian countries PH ranked 7th with India & Indonesia at rock bottom] which means that it has some barriers and restrictions on trade, such as tariffs, quotas, subsidies, and regulations.
ME Here’s another question from our televiewer: How about corruption? How does it affect the relationship between trade openness and FDI?
MR AI The Philippines has a high level of corruption [2023 Corruption Perception Index: among 180 countries PH ranked 115th, among 10 ASEAN PH ranked 7th with Laos, Cambodia, and Myanmar at rock bottom] The Philippines has a serious problem of governance, transparency, and rule of law.
Corruption hurts the country’s economy, society, and politics, as it reduces the efficiency and effectiveness of public services, erodes the trust and confidence of the people, and fuels social discontent and conflict. It creates barriers and distortions in the international trade of goods and services.
ME We have here a question about the International Criminal Court. The President reiterated he is not cooperating with the ICC probe on former President Duterte alleged crime against humanity. How does it affect the President’s thrust in FDI?
MR AI Marcos Jr.’s stance on the ICC may have adverse consequences for his FDI thrust on the world stage. It will deter some foreign investors who value human rights, democracy, and accountability, to invest in the Philippines, hence, affecting the welfare and rights of the Filipino people.
ME Well, thank you very much, Mr. AI, for sharing your insights and expertise on this fascinating and complex topic. I’m sure our viewers have learned a lot from you today. Thank you, everyone, for watching PoliTik Talk, and stay tuned for more political topics of the day. Good day!
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