Potential FDI in the Philippines: lessons from European Integration

Transcription

1 Potential FDI in the Philippines: lessons from European Integration Presentation to BPI & Guests Manila, October 23, 2014 Thierry APOTEKER CEO, TAC

2 FDI Prospects for the Philippines Lessons from EU Integration Key Messages Economic and trade integration reinforces the role and importance of FDI Integration processes are different in the EU and ASEAN, but both are associated with increasing regional trade and investment. Germany as a leading OFDI nation in EU cannot be replicated with Japan OFDI in ASEAN, but similarities exist. FDI attraction highly dependent on business conditions Economic and market size, business environment, infrastructure / logistics are critical factors, at least as important as labor cost The Philippines are still lagging for FDI attraction Surveys and analysis suggest that companies developing a structured regional strategy will be the winners of AEC alongside MNCs. 2

3 FDI Prospects for the Philippines Lessons from EU Integration Integration process in the EU and ASEAN Many similarities in the two regional integration histories Initial rationale for integration: international relations and political threats (Soviet Union for the EU, domino theory about communism for ASEAN) A process however centered around trade integration followed by economic integration (and later financial integration) Use of soft power as the major thrustin terms of international relations Ability to enlarge and incorporate highly different countries if common vision is shared (importance of consolidating democracy for EU successive enlargement after 1980, enlargement to ex-communist countries in ASEAN) 3

4 FDI Prospects for the Philippines Lessons from EU Integration Integration process in the EU and ASEAN Two critical differences Geometry The EU has a variable geometry withinthe block (Eurozone, Schengen, European Defense Units ), while ASEAN is engaged in many agreements outside the block Institutional building Increasing devolution of sovereign powers to the EU institutions: European Commission fortrade and investment relations, agriculture policy, infrastructure, regional policies; European Court of Justice can over-rule national decisions; European Central Bank); Conversely, the ASEAN Secretariat remains weak with almost all areas still strictly under national control; Interesting step with ASEAN s Committee of Permanent Representatives and EU s COREPER 4

5 FDI Prospects for the Philippines Lessons from EU Integration ASEAN integration: noodle bowl of trade agreements 5

6 Role of FDI inflows for ASEAN Important role of FDI flows in ASEAN economies Asia: major sources and destination of M&A 6

7 FDI in the Philippines Japan and Singapore: topping FDI sources with offshore centers But still limited FDI macro role of FDI inflows in Philippines 7

8 German OFDI concentrated in two different areas 8

9 Japan OFDI: LT trend with progressive increase 9

10 Japan OFDI: recent acceleration in ASEAN Japan interest for ASEAN countries: related to improving returns? 10

11 Japan OFDI: targeting domestic / regional markets 11

12 Labor cost important Wages Base salary (monthly) Source: JETRO Survey

13 but related to productivity gains 13

14 and business easiness 14

15 Labor mobility issues to sharpen in ASEAN 15

16 Key issues for foreign investment - Thailand 16

17 Key issues for foreign investment - Vietnam 17

18 Key issues for foreign investment - Philippines v 18

19 AEC creating opportunities and challenges Source: BCG, Oct.14 19

20 ASEAN regional companies likely to play a critical role Source: BCG, Oct.14 20

21 ASEAN purely domestic companies likely to suffer 21

22 TAC Contacts Research & Analysis Thierry Apoteker, CEO, Sylvain Barthélémy, Head of Research, Customer Relation Morgane Lohézic, Thierry Da, Jocelyne Vaubourg, Tel: