Perception of Risk
MANILA, Philippines - The Philippines is a less risky destination in the race for foreign direct investment (FDI) compared to its two primary competitors in the view of IT-BPO and shared services investors. China and India are giants not just in terms of their very large populations, but their capacity for attracting foreign investment. China announced recently that it attracted a record - and staggering - $105 billion in FDI last year.
India may have taken in as much as $30 billion in FDI in 2010, down from more than $36 billion the previous year. If India loosens restrictions on foreign investment as economists and investors urge, FDI would likely soar. According to the United Nation's trade and development agency, China and India will be the No. 1 and 2 recipients of FDI in the world, followed by Brazil, in 2011.
FDI into the Philippines was less than $2 billion last year. Despite the disparity in the capacity of the Philippines to attract FDI compared to its neighbors, a recent survey shows that many investors in the Philippines believe it to be the same or less risky than China or India. The survey was conducted by the Business Processing Association of the Philippines and Outsource2Philippines in February. More than 170 responses were received.
For half of all IT-BPO and shared services executives who responded to the first-quarter survey, the Philippines is "less risky" (37%) or "much less risky" (13%) compared to India when it comes to investing and operating in the Philippines. There's little reason for complacency, however, since 42% of respondents found the Philippines about the same in terms of risk compared to India.
Perception of risk for the Philippines compared to China showed the Philippines at a significant advantage, with 64% of respondents indicating that the Philippines is "less risky" (40%) or "much less risky" (24%). Twenty-two percent of respondents found the Philippines to be about as risky as China. There is a small caveat. More respondents, 15%, found the Philippines "more risky" (12%) or "much more risky" (3%) than China, compared to just 8% when compared to India.
Despite significantly high levels of negative publicity surrounding the Philippines outside the IT-BPO and shared services industry, the Philippines appears to be well-regarded within the industry itself. Questions to consider are whether the goodwill associated with the Philippines' IT-BPO and shared services brand can be leveraged to extend perception of its capability to deliver more complex, value-driven services; and, if positive perception can be further leveraged to support investment in other areas, such as tourism.
Despite the generally favorable results of the study in terms of perception of risk in the Philippines for investors, the survey also showed that much work remains to be undertaken to enhance perception of the Philippines as a credible FDI destination at a most basic level. …