Foreign Investment Laws in the Philippines
Introduction
The Philippines is an archipelago of some 7,100 islands in Southeast
Asia. Known as the "Gateway of the East to Asia," this developing
country has a liberal foreign investment regime. The country, through
fiscal incentives and foreign ownership liberalization, seeks to
attract foreign direct investments which will assist in its
reconstruction and modernization. The new and fresh approach in its
foreign investment laws is consistent with economic globalization and
cooperation.
The heart of the foreign investment laws in the Philippines lies in
the 1987 Constitution, the Omnibus Investments Code 1987, the Foreign
Investments Act 1991 and the Special Economic Zone Act 1995. While
numerous other legislations one way or another affect foreign
investments in the Philippines, this article's scope is limited to
discussing important provisions of the abovementioned legislations.
The Constitution of the Philippines
The 1987 Constitution of the Philippines[1] empowers the Government to
regulate foreign investments within its jurisdiction in accordance
with national goals and priorities.[2] The Government has exclusive
control over the country's natural resources, although the Government
may undertake exploration and development through co-production, joint
ventures, or production-sharing agreements with Filipinos or entities
in which at least 60% of capital is owned by Filipinos.[3] This 60%
requirement also applies in relation to foreign ownership of public
utilities and educational institutions.[4]
The Constitution further authorizes the Congress, when national
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[27] See § 3 of Republic Act No. 7916, Special Economic Zone Act
(1995) (Phil.), amended by Republic Act No. 8748 (1995), available at
www.chanrobles.com/specialeconomiczoneact.htm.
[28] Id. § 4.
[29] Id. § 24.
[30] The incentives include net operating loss carry over, accelerated
depreciation, exemption from export tax, foreign exchange assistance,
financial assistance, and exemption from local taxes and licenses:
Presidential Decree No. 1786 (1981) (Phil.), available at
www.chanrobles.com/presidentialdecreeno1786.htm.
[31] Registered enterprise established in an export-processing zone is
entitled to the general incentives provided by the Code, and is also
exempt from the payment of local government fees or taxes, except real
estate taxes: § 18, supra 27.
[32] Id. § 7.
[33] Id.
Sweeney, M. (2010). Foreign direct investment in India and China: The creation of a balanced regime in a globalized economy. Cornell International Law Journal, 43, 207-248. Retrieved from http://www.lawschool.cornell.edu/research/ilj/upload/sweeney.pdf
The Singapore government attracts foreign business to invest in the country by offering trade agreement practices and their open economy. The advantage of having foreign business
The 1920s ended the greatest wave of immigration in American History because of the immigration restriction acts of 1921 and 1924 (Shmoop Editorial Team). Immigration from the Philippines to the United States was not restricted. The Philippines was considered United States territory during this time, so traveling to and from the United States was easy (Dela Cruz and Agbayani-Siewart). Farmers of California and canning factories in Alaska began enrolling Filipino workers to meet the need of labor. In 1920, around 5,600 Filipinos lived on the West Coast of the United States, and by 1930, around 45,400 Filipinos lived on the West Coast. In California, Oregon, and Washington, Filipino migrant workers contributed much of the seasonal labor for fruit and vegetable farms. The West Coast of the United States was not the only ones who were recruiting Filipinos but Hawaii, too. Many Filipino agricultural workers’ destination was Hawaii. The peoples of the Philippines speak many different languages such as Tagalog, Ilocano, and Visayan. The different languages spoken by the Filipino immigrants helped the Hawaiian planters to avoid the problems they experienced with the Japanese. The Hawaiian planters made sure to recruit workers from different regions of the Philippines and limited communication between the Filipino workers. Between 1909 and 1914, about 4,ooo Filipinos immigrated to Hawaii each year. In 1915, the Philippine legislature passed laws controlling the recruitment of Filipinos. The numbers picked up again in 1920. Half of all the plantation workers in Hawaii were Filipinos in 1925, and by the early 1930s, Filipinos made up
Political and legal considerations were given first priority in this analysis with primary emphasis given to whether a country's legal or political system prohibits or impedes foreign investment. If a country's political or legal system discouraged or prevented foreign investment, that country was disqualified from further consideration. Factors considered when assessing the political and legal environment:
By definition foreign direct investment is the acquisition of tangible assets such as machinery, land and factories; this type of investment are often between two companies- usually multinationals from different countries. FDI is one of the benefits of globalisation as it has a direct impact on aggregate demand having a follow on effect on technology, job opportunities and increased intellectual property owned by countries. In this essay I will discuss some of the factors that affect a country’s disposition to gaining foreign direct investment.
Woodward, D. (2001). The next crisis?: Direct and equity investment in developing countries. London: Zed Books.
In order to try and diversify the economy, Honduras has avoided harsh protection policies and has instead encouraged foreign investors to help strengthen the economy. The high crimes rates turn most international investors away from Honduras, but nearby countries, such as the United States of America still provide investors. Yearly, the U.S.A invests $1.2 billion into the economy of Honduras and provides nearly $5.2 billion from trade (10). The benefits from these companies do not stop at the money they provide in the Honduran economy, but they also provide valuable infrastructure such as; improved roads, electricity lines, and available water. Foreign investors follow nearly the exact same requirements that domestic investors must follow, which require c=government permission they they want to invest in “basic health services,
Over the years, the Philippines has gone from being one of the richest countries in Asia to being one of the poorest. It has experienced growth and development since World War II. The current administration under President Gloria Macapagal-Arroyo is aiming for a more rapid growth in the coming years. In 2004, the Philippine economy grew by 6.1% surprising everyone. In 2005, the Philippine peso appreciated by 6%, the fastest in the Asian region for that year. At present, the administration is meeting its expected target growth and is continually looking positive for the future.
It is assumed that greater is the size of the market, the more is the inflow of FDI (Pajunen, 2008). The second factor that is required for the investment is the probable growth of the size of the market in which the investment is being looked upon (Head and Ries 2008). The third factor is the level of productivity and the habits and the routines of the employees of the country. The countries that are on the higher side of productivity are the ones that attract more number of foreign investors. So it is essential for the government of the country to focus on improving the productivity of employees and thus the investments. The government should focus on upgrading the education system in the country so that appropriate knowledge is imparted and more skilled workers are produced (Twomey, 2000). The fourth factor that affects the investment decision of the foreign country is the infrastructure of the country in which the investment is done. It is essential to have specific infrastructure that helps to create extra ordinary products that are high in value. It is not necessary to have protection of the intellectual property right (IPR) in the host country if the foreign investment is focusing on local usage. On the contrary if the foreign investors have to export goods or services for the host country then the sixth factor comes into the picture. This last factor says that if the IPR of the host country is not protected then the investor tends to move to the country that has better protection of the IPR (Mello, 1997). Host countries also need to balance between regulating the entry of foreign capital and allowing to competition. Providing the knowledge based and and capable to competition economies with appropriate
Over the years, foreign direct investment (FDI) has become a popular way for countries to move capital flows from one country to the other. Basically, foreign direct investment simply refers to an instant when a business entity for a particular country invests in an income generating asset in another country with a hope of return on the investment. Foreign direct investment has its benefits to the foreign investor, the home country and the host country (Froot 1993, 60). However, it should be noted that the benefits that come about as a result of FDI can only be possible if all the three parties follow the right regulations and the ethical ways of doing business is strictly adhered to. This paper sheds some light on the costs and benefits of FDIs to the investors, the home country and the host country. In addition, it will also review how the country and the firms’ level of development and growth play a role in determining the costs and benefits accrued from the FDIs (Weigel, Wagal & Gregory 1997, 56).
The main concept discussed in this essay is foreign direct investment. FDI is, according to the OECD, “a category of cross-border investment made by a resident entity in one economy (the direct investor) with the objective of establishing a lasting interest in an enterprise (the direct investment enterprise) that is resident in an economy other than that of the direct investor.” Firms invest in foreign economies in order to exploit their particular advantages and FDI is the preferred process, as opposed to licensing or agreements and exports. The advantages that firms often possess are patented technology, managerial skills, marketing skills and brand names.
Figure 1 shows the recent trends in FDI inflows of some developing countries. According to the UNCTAD report of 2011 China has the highest FDI inflows among all the developing countries like Hong Kong, Russia, Singapore, Brazil and India; because China has introduced FDI over 20 years ago and has progressively pursued foreign investment while adjusting its FDI policies. Since 1993, China has attracted the largest amount of FDI of all developing countries while increasing its levels of both exports and technological advancement
Investment in India has increased significantly since the 2001 Indian Government’s approval of Foreign Direct Investment (FDI) reform. In mid-year meetings of 2001, the Government liberalized the restrictions on FDI into India in select industries. The infrastructure of the Indian Government is increasingly interested and actively pursuing FDI from countries such as the United States. India is currently offering automatic business approvals for new businesses that have an initial investment of 100% foreign capital in industries that are considered tourism based. (Indian Embassy, 2001) According to the 2001 guidelines issued under section 4 (iv.), Businesses that are considered to be “commercial premises, hotels, resorts, city and regional level urban infrastructure facilities…” which qualify for up to100% FDI.
Foreign Direct Investment, or FDI, is a type of investment that involves the injection of foreign funds into an enterprise that operates in a different country of origin from the investor” (economy watch). The determinants of foreign direct investment may be the socio-economic, financial and the cultural factors which usually have positive and negative effect on the foreign direct investment. The risk is attached to the determinants of foreign direct investment. This paper examines the major determinants of foreign direct investment exchange rate, market size, political instability, infrastructure, openness to market and military rule. Data constraints in Pakistan some determinants consider to be the inefficient.
It has three major island groups which are the Luzon, the largest island and where the capital is located; Visayan, and Mindanao. Eleven islands make up 94 percent of the Philippine landmass, and two of these--Luzon and Mindanao--measure 105,000 and 95,000 square kilometers, respectively. They, together with the cluster of the Visayan Islands that separate them, represent the three principal regions of the archipelago (many scattered islands in a large body of water) that are identified by the three stars on the Philippine flag.