MANILA, August 10 , 2004 (STAR) (AFP) - Total foreign direct investment (FDI) in the Philippines has been falling by an annual average of 34.1 percent over the past six years, according to a report by the Institute for Development and Econometric Analysis (IDEA).

Investment policy reforms by successive governments in the late 1980s and 1990s helped boost FDI pledges to a record 262.1 billion pesos (4.6 billion dollars) in 1997.

But since then FDI pledges have contracted progressively hitting just 34 billion pesos last year, the lowest recorded level so far, the report said.

It said a number of factors contributed to the loss of FDI among them the 1997 regional financial crisis, political instability, the high cost of doing business in the Philippines and poor infrastructure.

The report said China has now emerged as the largest recipient of FDI in Asia totalling 52.7 billion dollars in 2002.

India and Vietnam have now over taken the Philippines in attracting FDI while Japanese investors, still the country's biggest source of foreign direct investment accounting for 31.1 percent, are now going to China.

The report said Japanese investment pledges to the Philippines have contracted from 43.9 billion dollars in 1998 to just 8.8 billion dollars last year.

"Japanese firms are no longer keen on the Philippines as an attractive regional manufacturing hub in Asia," the report said.

"They now prefer China due to its low cost of doing business and its huge market size."

"Based on a recent survey conducted by the Japan External Trade Organisation (JETRO), 36 percent of new offshore investments by Japanese manufacturers in 2002 went to China while 14 percent went to Malaysia, Indonesia, Philippines and Thailand."

The report said although the government approved 115.5 billion pesos worth of FDI in the first quarter of this year, up from the 6.5 billion pesos for the same period last year, it "does not necessarily mean an improvement in the country's investment climate."

"The increase is due mainly to a one-time, big ticket project by GNPower, owned by Power Partners of Nauru, which amounted to 96.5 billion pesos."

The report said there were no foreign investment pledges in the mining sector during the first quarter of this year due to the Supreme Court's decision prohibiting 100 percent foreign-owned firms from mining operations in the Philippines.

This has spelt the death of an industry which in 1996 saw some 9.4 billion dollars worth of foreign direct investment.

Last year just 15 million dollars worth of investments were approved, the report said.

Philippines seeks to raise taxes on oil imports 08/10 10:15:02 AM

MANILA,(AFP) - Philippine President Gloria Arroyo is seeking a hike in taxes on imported oil as she tries to rein in the country's troublesome fiscal deficit, officials said Monday.

Manila wants to raise excise taxes on oil imports to five percent from three percent, which Trade Secretary Cesar Purisima said would raise 29 billion pesos (517.8 million dollars) in additional state revenue every year.

The move comes as global crude oil prices trade near record highs.

"Our country needs to squarely address our budget deficit problem," Purisima said in a statement.

A proposed law change to increase the tax has been filed in the House of Representatives.

However some politicians are cool to the idea, fearing a hike in oil taxes will mean a further spike in fuel prices which could feed through into dearer transport fares.

Senate ways and means committee chairman Ralph Recto, an Arroyo ally, urged the government to defer passage of the bill.

With oil prices soaring to 21-year highs, Recto said it would be an "uncaring government" that would levy higher oil taxes.

He called for the bill to be "put in the backburner while oil prices are on a rampage."

Purisima though said higher oil taxes could be structured so that certain oil products like liquefied petroleum gas could be exempted or levied at a lower rate.

"The additional excise taxes on petroleum products is one of our most viable alternatives considering that it is easy to collect, monitor, and when necessary, adjust," Purisima said.

Reported by: Sol Jose Vanzi

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