Daniel Dublin International Political Economy

AB Foreign Service/ FS 302 Sir. Jumel G. Estrañero

The Philippines and FDI towards Economic Development

Before anything else, FDI or Foreign Direct Investment is a business investment made up
by company or individual from another country to one country that the foreign investors have
control over the company purchased. Foreign direct investments have 3 types categorized by its
nature, having horizontal, vertical and conglomerate type. A horizontal foreign direct investment
refers to the investor establishing the same type of business to a foreign country as it operates in
its home country. A vertical foreign investment refers to the investor establishing a different but
related business to its main business in a foreign country like manufacturing company. Last is the
conglomerate foreign direct investment refers to a company makes a foreign investment in a
business that is far unrelated to its main business in its home country.

The advantages of foreign direct investment are stimulation of economic development

creating benefits not just for investors but also in the local industry. FDI also made international
trade easy with reduction of tariffs and taxes. It also creates new jobs by building new companies
of investors that create new opportunities and more jobs leads to an economic development and
also the development of human capital resources by using its knowledge and force in business
systems. It also creates exchange of new technologies and skills or called resource transfer.
Lastly, it also increases the productivity of demanded goods in a target country. If there is
advantages, then FDI also have its disadvantages wherein FDI become hindrance to domestic
investment or the domination of foreign investment in a country. FDI also are affected in
political changes within the invested country. It also affects the foreign exchange rates where
there is one country in advance and others are affected. FDI also make goods' prices higher in
market. And last is the creation of modern economic colonialism where foreign direct investors
to third-world countries could probably fully control the economic fields of these countries.

In our country, Philippines, we have many foreign direct investors from the countries
Singapore, Japan, Netherlands, US and Luxembourg, South Korea is also one of the states that
could engage with as part of economic cooperation with Philippines. Our country have
established good relationship with South Korea in the first place and have established and
invested in our country for many business companies. China is also one of the countries that can
engage in Philippines' economy because there are many Chinese who have built their businesses
in the Philippines and China are one of the richest countries in the world. China also invested in
the Philippines not just for economy but also in the defense aspect. Disregarding the disputes
between China and Philippines on the South China Sea islands, China brought drastic boost and
changes in the Philippines' economic condition.

One of the major challenges of the Philippines in the FDI is drastic political changes and
issues. With this, investors and their businesses are also affected and should go along with the
changes of the political concept and system of our country. Natural disasters and environmental
changes are also challenge for the Philippines' FDI because it causes big destruction of properties
and investments and when destruction happens, huge amount of money are needed to have its
recovery and also the government also are obliged to help the foreign investors to recover its
destructed properties. Last is the reduction of land spaces because of the overflowing foreign
investors entering our country and building their companies and buildings, huge land space are
consumed and become limited to Filipino people and it causes destruction of environmental
areas like forests and mountains just to have a designated space for the infrastructure. With the
globalization, there will be huge effects on the amount of money that goes inside and outside of
the Philippines. With building of good relationship and promoting our country to other countries,
it will encourage countries to have investments and build businesses to the Philippines. With the
globalization, we could also discover new products and technologies that could have set a high
demand in their products to the Philippines and could be patronize by Filipinos and that would
result to huge boost in the outflows of FDI in the Philippines.

As a concerned Filipino, I recommend to the Philippines especially to the government to

encourage more useful and reliable foreign investments to enter our country. The government
should also limit the FDI entering our country that causes only destruction and abuse of
Philippines' resources. If our government could not avoid the overflowing of FDI entering our
country, the rulers should established new rules and regulations so that foreign investors will be
limited to their actions inside our country and avoid abuse in the Filipinos and our country's
resources. Another recommendation is that our domestic investors should also engage in
international economic cooperation to have our own contribution in the development of our
economy. Last recommendation for the Philippines is to avoid dependency to these foreign
investments and not doing our own duties and actions for the economic development because it
may disappear not today, but in the future and the number of FDI entering our country may
lessen so as a preparation of our country's stability and development, the Filipinos should also
start to invest not just inside our country but also globally.