Determinants Of Foreign Direct Investment Inflows Into The Philippines:a Time Series Analysis

In the context of Asian countries as the world’s major recipients of FDI,this study,grounded on the guideline of FDI-enhanced economic growth,aims to explore the determinants of FDI,focusing on a developing country the Philippines for empirical analysis,so as to propose countermeasures for the Philippines policymakers in attracting FDI inflows.Based on the theory of internationalisation and the eclectic paradigm theory,this study uses the ARDL model,based on a 50-year-long data from 1970 to 2020,for quantitative analysis,to empirically study the relationship between FDI and seven explanatory variables of market size,labor force,trade openness,real effective exchange rate,inflation,external debt stock,and total fixed assets,to capture key factors contributing to the inflow of FDI in the Philippines.This study may provide significant explanations in the Philippine FDI perspective thus recommendation of applicable policies can be applied in the current situation and contributes to the current FDI literature.As revealed by the findings,market size,labor force,and trade openness have a positive effect on FDI inflows to the Philippines,while the real effective exchange rate,inflation,and external debt stocks have a negative effect on FDI inflows to the Philippines.To put it in detail,only the external debt stock shows a long-term impact on the Philippines’ FDI inflows,while market size,trade openness,real effective exchange rates,inflation,and external debt stocks show a short-term impact on the Philippines’ FDI inflows.Based on the above-mentioned findings,the study puts forward the following two recommendations:First,the Philippine government should focus on further stabilizing the macro-economy,human capital development,and guiding FDI into export-oriented sectors.Second,the traditional factors contributing to FDI inflows are still important and should be considered in formulating FDI-attracting policies in promoting national economic growth.The challenge the Philippines must address is to improve education,finance,and services.In this post-pandemic economic recovery,the Philippines must adapt to the global recovery by providing incentive packages to foreign and local investors alike.