Saturday, 15 September 2007

100 multinational execs name RP to top 7 destinations for investments

By Dennis D. Estopace
Original article at The Business Mirror

THE Philippines was named by a hundred executives of multinational companies as among the top seven destinations for new investments in the region, according to a recent survey by the Frontier Strategy Group.

In the survey titled “Shifting from the BRICs to the Future 7 (F-7): The Seven Markets That Will Drive Corporate Profit Growth in 2008 and Beyond,” the correspondent executives highlighted seven key markets—Indonesia, Inland Brazil, inland China, Mexico, the Philippines, Turkey and Vietnam—as “the most critical markets in achieving corporate growth and outperforming the competition in 2008 and beyond.”

The so-called BRIC markets—Brazil, Russia, India and China—had been hyped much earlier as vital markets.

The Frontier Strategy Group is a Washington-based consulting group and has former US ambassador to the Philippines Nicholas Platt as an advisor.

The survey showed the Philippines scoring 3.7 in terms of attractiveness of investment environment and 4 on the size of market opportunity on a scale with 5 being the topmost.

The country outscored Indonesia—at 2.7 and 1.3—but is behind Vietnam, with scores of 4.1 and 3.9.

The paper said that the group asked executives to take in account the following factors in attractiveness of the investment environment rating: foreign-investment restrictions, labor laws, work-force productivity, corruption, government transparency, political stability and legal-dispute resolution.

In ranking the markets based on size of the market opportunity, the group said it asked executives to choose “the markets in which they would be most interested in investing if attractiveness of the investment environment was not a factor.”

The paper said that rising wages, thinning number of skilled workers and market saturation of up to 70 percent in key cities the likes of Shanghai and Mumbai are the factors commonly cited by executives as reasons for the push toward new markets like the Philippines.

Likewise, they said there is a “likelihood of declining economic growth rates as governments attempt to contain inflation.” The Philippines has been posting lower inflation rates from the start of the year as monetary officials began mopping up liquidity and maintained low interest rates.

On the other hand, the pull factors these executives cited include the fast growth of the F-7 markets. Aside from large populations, “each economy is in the top quintile in terms of size [of the economy] and together they boast an average annual growth rate of 7.5 percent.”

Aside from these, the executives cited the seven markets as attractive because of “close proximity to some of the world’s largest markets” like Coastal China, Japan and India.

The Philippines was among those cited for its “increasing openness to foreign investments.”

The Philippines was cited as a desirable new investment destination by 17 percent of the executives surveyed, more than Indonesia with 9 percent, but trailing Vietnam with 28 percent.

“As the rates of profit growth in the traditional BRIC markets decline, companies will increasingly turn to the F-7, which have many of the same characteristics that initially put the BRIC countries on the radar screens of multinationals—large, fast-growing populations and economies, abundant labor forces, and increasing receptiveness to foreign investment,” said the report.

The survey said the most important success factor in these seven markets include aligning incentives with host governments and identifying joint ventures and merger and acquisition targets.

On the other hand, the factors “that keep executives up at night” included economic overheating and rising inflation, shortage of human resources, lack of access to natural resources and pollution, and environmental degradation.

A downturn in the US economy was also noted as the No. 1 threat to regional growth.

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