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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., 2008. "FDI Investment Incentive System and FDI Inflows: the Philippine Experience," Research Paper Series RPS 2007-03, Philippine Institute for Development Studies.
    • Handle: RePEc:phd:rpseri:rps_2007-03
    DOI: https://doi.org/10.62986/rps2007.03
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    References listed on IDEAS

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    1. 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, April.
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    4. 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.
    5. Gordon H. HANSON, 2001. "Should Countries Promote Foreign Direct Investment?," G-24 Discussion Papers 9, United Nations Conference on Trade and Development.
    6. 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.
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    2. Mari-Len Reyes-Macasaquit, 2008. "Industrial Agglomeration in the Philippines," Development Economics Working Papers 22690, East Asian Bureau of Economic Research.
    3. 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.
    4. Macasaquit, Mari-Len R., 2008. "Industrial Agglomeration in the Philippines," Discussion Papers DP 2008-14, Philippine Institute for Development Studies.
    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. 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.
    7. 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.
    8. 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.

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    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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