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FDI Investment Incentive System and FDI Inflows: The Philippine Experience

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  • Aldaba, Rafaelita M.

Abstract

This paper examines the country’s investment incentive program for foreign investors and its success in attracting substantial FDI inflows. The analysis compares the FDI incentive system and FDI performance of the Philippines with other Asian countries. Since it is difficult to untangle the effect of tax incentives from other factors, the analysis also takes into account other factors such as level of competitiveness, costs of doing business and availability of infrastructure. Our experience tends to suggest that in the absence of fundamental factors such as economic conditions and political climate, tax incentives alone are not enough to generate a substantial effect on investment decisions of investors nor can they compensate for the deficiencies in the investment environment.

Suggested Citation

  • Aldaba, Rafaelita M., 2006. "FDI Investment Incentive System and FDI Inflows: The Philippine Experience," Discussion Papers DP 2006-20, Philippine Institute for Development Studies.
    • Handle: RePEc:phd:dpaper:dp_2006-20
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    File URL: https://www.pids.gov.ph/publication/discussion-papers/fdi-investment-incentive-system-and-fdi-inflows-the-philippine-experience
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    References listed on IDEAS

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    1. Robert J Rolfe & David A Ricks & Martha M Pointer & Mark McCarthy, 1993. "Determinants of FDI Incentive Preferences of MNEs," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 24(2), pages 335-355, June.
    2. Blomström, Magnus & Kokko, Ari, 2003. "The Economics of Foreign Direct Investment Incentives," EIJS Working Paper Series 168, Stockholm School of Economics, The European Institute of Japanese Studies.
    3. Hines, James R, Jr, 1996. "Altered States: Taxes and the Location of Foreign Direct Investment in America," American Economic Review, American Economic Association, vol. 86(5), pages 1076-1094, December.
    4. Benjamin E. Diokno, 2005. "Reforming the Philippine Tax System: Lessons from Two Tax Reform Programs," UP School of Economics Discussion Papers 200502, University of the Philippines School of Economics.
    5. Gordon H. HANSON, 2001. "Should Countries Promote Foreign Direct Investment?," G-24 Discussion Papers 9, United Nations Conference on Trade and Development.
    6. Louis T., Jr. Wells & Nancy J. Allen & Jacques Morisset & Neda Pirnia, 2001. "Using Tax Incentives to Compete for Foreign Investment : Are They Worth the Costs?," World Bank Publications - Books, The World Bank Group, number 13979, December.
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    Cited by:

    1. Mari-Len Reyes-Macasaquit, 2008. "Industrial Agglomeration in the Philippines," Development Economics Working Papers 22690, East Asian Bureau of Economic Research.
    2. Mohammad Ali & Alok K. Bohara, 2017. "How Does FDI Respond to the Size of Shadow Economy: An Empirical Analysis under a Gravity Model Setting," International Economic Journal, Taylor & Francis Journals, vol. 31(2), pages 159-178, April.
    3. Philippine Institute for Development Studies, 2008. "Industrial Agglomeration and Industrial Policies : The Philippine Experience," Development Economics Working Papers 22681, East Asian Bureau of Economic Research.
    4. Dennis Botman & Alexander Klemm & Reza Baqir, 2010. "Investment incentives and effective tax rates in the Philippines: a comparison with neighboring countries," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 15(2), pages 166-191.
    5. International Monetary Fund, 2012. "Philippines: Technical Assistance Report on Road Map for a Pro-Growth and Equitable Tax System," IMF Staff Country Reports 2012/060, International Monetary Fund.
    6. Aldaba, Rafaelita M., 2014. "Investment Liberalization and Facilitation Toward AEC 2015," Philippine Journal of Development PJD 2012 Vol. 39 Nos. 1-2, Philippine Institute for Development Studies.
    7. Macasaquit, Mari-Len R., 2008. "Industrial Agglomeration in the Philippines," Discussion Papers DP 2008-14, Philippine Institute for Development Studies.

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    More about this item

    Keywords

    Foreign direct investment (FDI); investment incentives; corporate taxation;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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