Running head: INVESTMENTS AS CATALYST FOR PHILIPPINE DEVELOPMENT

Investments as Catalyst for Philippine Development

Patricia Anne M. Cosca
Adamson University

Author Note
Patricia Anne Cosca. College of Engineering. Adamson University.
Patricia Anne Cosca is now at the Department of Industrial Engineering, Adamson
University.
Correspondence concerning this article should be addressed to Patricia Anne Cosca,
College of Engineering, Adamson University, Ermita, 1000 Manila. Contact: patricia
annecosca@yahoo.com.ph

INVESTMENTS AS CATALYST FOR PHILIPPINE DEVELOPMENT

Abstract
This paper looks into different reasons how investments from the government and from the
private sector could be catalyst for the development of the Philippines. It examines a process
which the researchers believe to be the answer to the Philippine puzzle concerning poor
investment climate. This process explains how government investments could lead to high level
of investors confidence to private sectors, which finally could boost the Philippine development.
On paper, PPP and FDI are also considered good programs of investments in the country.
The research provides examples of investments which are among the most essential ones for
Philippine development. Education and infrastructure are two of the government investments
which are explained in the paper. While private investments included are: manufacturing, BPO,
and agriculture.
Keywords: public-private-partnership, business process outsourcing, foreign direct
investments

INVESTMENTS AS CATALYST FOR PHILIPPINE DEVELOPMENT

Investments as Catalyst for Philippine Development

Analysts say that the Philippines has so many potentials and the government
expresses strong support to find these potentials. World Economic Forum (___) states that
investments are key drivers for trade, growth, and prosperity. So for the Philippines, investments
will probably be the boosters to these potentials. Successes of some countries like China and
Malaysia are results of their openness to investments. However, it is not easy to gain strong
confidence for investors to invest in a country. For some developing countries like the
Philippines, the government should take some initiatives and work on several factors that many
investors take into consideration before they invest. In this paper, the researchers present a
process which is about the governments investments to improve investor climate for the private
sector which in the end would bring success to the country.
Discussion
In Intals (2004) book which focuses on a framework of sustainable development,
he points out investments as central to the growth process. He explains that the investments rate
should be at least 25-30 percent range of gross domestic product given increasingly capitalintensive nature of private industries (e.g., semiconductors and electronics) and the greater need
for much improve infrastructure facilities in the country.
Investments in the Philippines Today
The Philippines has been making big strides since the start of the Aquino
administration. Philippine Daily Inquirer (2014) says businessmen gave President Benigno
Aquino III a barely passing mark for his handling of the economy during his first year in office.

INVESTMENTS AS CATALYST FOR PHILIPPINE DEVELOPMENT

He started quite well, giving investors fresh confidence with his pledge to fight official
corruption, which led to a surge in investments during the last half of 2010.
Fourth year since he was named President of the Republic, President Aquino led
the country to obtain its first ever investment grade from Moodys Investor Service. And it was
just a matter of time, two more investment upgrade ratings were recognized by the same
company. In addition, the country secured its place as Asias fastest growing economy and one of
the highest in the world at 7.2 percent in 2013 according to Philippine Daily Inquirer (2014).
Governments role on renewing investment climate
Purisima (2013) said that good governance is truly good economics. To improve
the investment climate, gain investor confidence, and ultimately generate much higher
investments in the country, a wide range of initiatives must be undertaken by the government.
These initiatives include reducing political uncertainty, preserving peace and order, and avoiding
policy inconsistency. Moreover, he believes that the government should work on stabilizing the
business environment and ensuring a predictable climate for investment and long term planning
(Intal & Largoza, 2004).
Improving the investment climate demands the highest sense of leadership,
effective and fair governance, institutions, and widespread support and cooperation from the
people. In the words of Intal & Largoza (2004), there is a general consensus on what our social
institutions should be: efficient, accountable, transparent, and participative.
Intal (2004) describes that the substantially high investment rate needs to be
financed domestically as much as possible to make it sustainable. We need political will on the
part of the government to build roads, sea and airports and other infrastructures, and remove
INVESTMENTS AS CATALYST FOR PHILIPPINE DEVELOPMENT

restrictions to the flow of local and foreign investments.

Lu Mai (___) said that a government should recognize the importance of human
capital investment. It leads to substantial increase in investments in education, health care,
student nutrition and early childhood development. The country should invest continuously in
improving the skill level of Filipino workers as part of the country's industrial adjustment
process.
Intal (2004) also believes that investment climate will also improve with peace
and development in Mindanao. An unstable Mindanao raises political risk premium on
Philippine debt and investment financials.
What is a critical challenge for the Philippine government is to improve an
investment climate, gain investors confidence, generate substantially high investments in the
country by both domestic and foreign investors, and thereby regenerate the Philippine economy
(Intal, 2004). Nevertheless, raising investors expectation and generating much higher
investments demand a wide range of initiatives. Among the important initiatives are: 1.
Governance initiatives, 2. Macroeconomics initiatives, 3.Infrastructural initiatives, 4.Promotional
and industry-specific strategic initiatives. Intals strong stand regarding the issue concerning
renewing investor confidence is the government to take some moves in order to set a fresh start
for new investors in the country (Intal, 2004).
Ultimately, when you begin to eliminate corruption, you begin to eliminate
poverty. It implies given limited resources, those should be spent for the things they are meant to
be spent for. Elimination of corruption indicates strong political will and dedication from the
government which brings optimism for investors.
INVESTMENTS AS CATALYST FOR PHILIPPINE DEVELOPMENT

Foreign Direct Investments

The government realizes that simply relying on domestic sources for capital is not
enough, prompting a strong push for foreign direct investments. Forte (2010) highlighted the
importance of FDI. Foreign Direct Investments influence the host countrys economic growth
through transfer of new technologies and know-how, formation of human resources, integration
in global markets, increase in competition, and firms development and reorganization.
Empirically, a variety of studies considers that FDI generate economic growth in the host
country.
Public-Private Partnership
The PPP is a key strategy of the Philippine development plan. With the end view
of fostering an environment conducive for private sector entrepreneurial initiatives, the
government has developed a policy environment that strongly supports private sector
participation in its development activities (Philippine Department of Finance, 2011).
Business Process Outsourcing
BPO is now one of the countrys biggest industries. Many of the biggest companies in
the world have set up their outsourcing units in the Philippines thereby beefing up further the
confidence of the investors. The Philippine Business Process Outsourcing industry, also referred
to as offshoring industry, continues to expand. BPO is a major dollar earner. The revenue from
the booming industry is expected to support the countrys foreign exchange reserves. The BPO
industry has expanded its coverage to include knowledge process outsourcing in accounting,
bookkeeping, animation, software development, payroll processing, and legal and medical
services (Manila Bulletin, 2013).
INVESTMENTS AS CATALYST FOR PHILIPPINE DEVELOPMENT

According to Philippine Daily Inquirer (2014), there had been much excitement
when Mr. Aquino announced his public-private partnership program for infrastructure
development.
Private investments
Every administrations goal is to attract private investments in the country.
Philippine Daily Inquirer (2014) proposed an idea related to investments to solve the problem of
joblessness: to focus on having labor intensive infrastructure projects that would achieve the twin
goals of providing jobs and reconstructing devastated areas
Infrastructure investments are probably the most essential for the Philippines. It is
a very good manifestation of a well-developed and industrialized country. The country must be
more aggressive in improving its infrastructure stock, which may well mean a higher share of the
government expenditures that goes to infrastructure investments. Given the tight fiscal situation
of the government, however, it may well encourage the private sector to undertake more of the
infrastructure investments (Intal & Largoza, 2004).
The agriculture sector is a very good example of where investments should go.
Remo (2012) said that the Asian Development Bank has urged the Philippines and its neighbors
to invest more in agriculture, saying that food production must increase to avoid supply shortage
and steep price increases over the medium term.
Investments like manufacturing and infrastructure demand large amount of
electricity. Unfortunately, not all investors are confident enough to invest on energy. Mueller
(2014) states that any kind of renewable, ecological friendly produced electricity is an essential

INVESTMENTS AS CATALYST FOR PHILIPPINE DEVELOPMENT

contribution to attract investors in the country and to protect our environment and nature for the
forthcoming generations and it will stabilize or lower electricity prices.
Espina takes a stand on his motto Industrialization Equals Employment Equals
Development. Industrialization is the key to drastically reduce the poverty level of the country.
The Asian Development Bank said the failure of the country to boost its industrial sector is a key
reason why its economic growth remains far from being inclusive. It added that the industrial
sector, which includes manufacturing, should be the one driving the economy to substantially
reduce unemployment and poverty. The industrial sector has the better ability to create job
opportunities for the people (Manila Bulletin, 2014).

Conclusions and Future Study

In order to fully understand how investments bring strong and sustainable
development in a country, it is essential to completely understand the process explained in the
research which is about the governments investments to bring a fresh climate to invest in for the
private sector. In total, the research focused on that process and provided examples of
investments to fortify the idea.
Acknowledging the potentials of the Philippines, the researchers believe that the
country needs investments to support its capabilities. As it is now on its run towards
development, the country needs investments to be a catalyst to accelerate the run. Investments
mean industrialization. And industrialization means development.

INVESTMENTS AS CATALYST FOR PHILIPPINE DEVELOPMENT

References
Aranda, R. (2014). The employment challenge.
Calica, A. (2014). NEDA updates development plan.
De Guzman, G. (2014). Does he really have a plan?
Espina, R. (2014). Industrialization equals employment.
Intal Jr, P. S., Largoza, G. (2004). Society, economy and Philippine Development.
Intal Jr, P. S., Largoza, G. (2004). Solving the Philippine puzzle.
Maysala, L. J. (2014). Solving unemployment.
Forte, R. (2013). The effects of foreign direct investment on the host country economic growth theory and empirical evidence. Retrieved from:
http://ideas.repec.org/p/por/fepwps/390.html.
Manibo, M. (2014). Hydro, wind power booms in Philippines in 2014. Retrieved from:
http://www.eco-business.com/news/hydro-wind-power-booms-philippines-2014/.
Remo, M. V. (2012). Investment in agriculture sector, PH urged. Retrieved from:
http://business.inquirer.net/97547/invest-more-in-agriculture-sector-ph-urged.
(_____) (2011). Privatization and public-private partnership (PPP) program. Retrieved from:
http://www.dof.gov.ph/?page_id=1318.

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10

(_____) (2013). PH secures 3rd investment grade rating from Moodys. Retrieved from:
http://business.inquirer.net/145921/ph-secures-3rd-investment-grade-rating-frommoodys.
(_____) (2013). China: Investing in human capital. Retrieved from:
http://www.oecdobserver.org/news/fullstory.php/aid/3781/China:_Investing_in_human_c
apital.html.
(_____) (2013). Editorial: booming business process outsourcing industry. Retrieved from:
http://ph.news.yahoo.com/editorial-booming-business-process-outsourcing-industry154323135.html