THE ESSENCE OF INVESTMENT PROMOTIONS

1. THE ESSENCE OF INVESTMENTPROMOTIONS

2. THE NEED FOR A PROACTIVEINVESTMENTS PROMOTIONS EFFORT ….there is a constant search for new investments that will provide the needed boost for their economic development programs • General modes of employment strategies are always being considered: • entry in government agencies and quasi-government enterprises; • development of new enterprises amongst the locals and; • foreign direct investments.

3. ROLE OF GOVERNMENT • Provides information to potential investors; • create an attractive image of the country as a place to invest,; • provide services to prospective; • offer tax incentives and grants; • provide industrial estates, export processing zones and other infrastructure and facilities; • attempt to simplify the bureaucratic procedures • negotiate bilateral tax, trade and investment treaties with countries where potential investments will come from; • create a favorable environment by guaranteeing repatriation of profits • assure access to imported components; • promise not to expropriate property without compensation • assure political stability, realistic exchange rates, and rapid growth

4. THE URGENCY • The irreversible trend towards “globalization”. • forcing global players to review their costs and strategies; • Global markets and sophisticated technology develop tools to choose the best investments sites for their operations. • With drastically reduced tariffs, firms no longer have to produce in every market; • Outsourcing has become a cheaper alternative;

5. THE PHILIPPINE REALITY • In 1999, World Competitiveness yearbook ranked the Philippines 34th ( 1st being the most competitive and 46th being the least competitive) in overall attractiveness. • Singapore, in comparison ranked 2nd; Hong Kong , 4th; Taiwan, 19th; Chine 22nd; Malaysia 23rd; Korea, 37th; Thailand 38th and Indonesia ,41st.

6. In a survey conducted by the Economist Intelligence unit, dubbed as the Philippine Corporate Update Program (EIU-PCUP)* , on March 12, 1999 said: • 52 % of the 21 respondents said they were “rationalizing their plans worldwide in line with globalization” 33 % answered “no” and 14% were “undecided”.; • When asked if they would locate their regional plants in the Philippines, 71% of the respondents said “No”, 6 per cent said “Yes” and 23 percent said they are undecided.

7. THE COMPETITION • Most developing countries are engaged in the same investment promotions efforts with much ardor, aggressiveness and intensity. • Competition for foreign direct investment has also increased because of the entry of new players like Vietnam, China, Korea.

8. GENERAL PHASES OF INVESTMENT IN THE ASEAN(Movement of FDI’s in the ASEAN bloc over the last 4 decades) • Initial Phase of Foreign Direct Investments: 1960’s and 1970’s • Emergence of new Capital Exporters and Investment Destinations: 1980’s • Saturation and Evolution of New Destinations: Early 1990’s • Crisis in ASEAN Countries: Late 1990’s

9. GLOBAL FDI FLOWS AND TRENDS • ( 1992 - Based on FIAS Study) • Majority of global Flows between Developed Countries • Developing Country shares Dominated by NICs and Asia • Major Capital Exporting Countries • FDI occupies a Small Share of Total Investments; Local Investment dominates

10. FACTORS INFLUENCING THE TREND • Globalization vs. “Regionalization” of Production • Difference among sectors • Size and nature of companies

11. INVESTMENT TREND WITHIN THE PHILIPPINES • Where are FDI’s locating? • EXPORT PROCESSING ZONES ( Baguio, Subic, Bataan, Mactan) • GOVERNMENT AND PRIVATELY-OWNED INDUSTRIAL ESTATES and TECHNO PARKS (Laguna, Cavite, Batangas, Rizal, Cagayan de Oro, Gen Santos City, Davao City – 4 industrial parks) • SPECIAL ECONOMIC ZONES (SZOPAD) • Provincial Agri-Industrial Centers ( Region XI, VIII, ) • GROWTH AND CONVERGENCE AREAS ( North QUAD, CALABARZON, SOCSARGEN, DAVAO INTEGRATED DEVELOPMENT AREA, CAGAYAN-ILIGAN CORRIDOR)

12. INVESTMENT TREND IN REGION XI Value of New / Expanded Investments (PhP ‘000) Davao City 11,990,379 69.58 Davao del Norte / Compostela Valley 90,689 0.53 Davao del Sur 738,878 4.29 Davao Oriental 291,101 1.69 South Cotabato 2,180,857 12.66 Sarangani 1,989,000 11.54 Total 17,232,629 100.28 Value of BOI registered Investments, 1997- May 2000.

13. REQUIRED INVESTMENT PROMOTIONS EFFORTS • Product - the intrinsic / comparative, competitive advantages of the investment site; • Price • the cost to the investor of locating and operating within this investment site. • tax incentives, grants, tariff protection and similar price mechanisms that can be extended by governments • Promotion - create an image, generate investments and investor servicing and aftercare activities.

14. COMPARATIVE STRENGTHS TO BE IN PLACE • Strategic Location • Availability of Highly Educated Professionals & Worker • A Working Democratic Government • Presence of Growing Markets • Conservation of Rich Natural Resources • Presence of Liberal Policies and Procedures • Expanding Infrastructure • World-Class Living Conditions

15. OTHER CONSIDERATIONS • Inventory of Investment Sites in Accordance to Local Development Plan • Zoning Plan • Environmental Policies • Local Incentives

16. BENEFITS OF FDI’s • Generation of new or expanded jobs • New skills and technology • Create forward and backward linkages with local firms • Provide increased competition for lackluster domestic sectors • Generate greater foreign exchange • Act as a conduit for new export markets