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Title Decentralization of Direct Foreign Investments: The Case of thePhilippines and Thailand

Author(s) Umali, Celia L.

Citation 経営と経済, 77(1), pp.19-73; 1997

Issue Date 1997-06-25

URL http://hdl.handle.net/10069/29066

Right

NAOSITE: Nagasaki University's Academic Output SITE

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KEIEI TO KEIZAI, Vol.77 No. 1 , June 1997

Decentralization of Direct Foreign Investments:

The Case of the Philippines and Thailand

Celia L. Umali

Abstract

Direct foreign investments (DFls) have been one the engines of

growth in the Philippines and Thailand. The DFls however tend to ag-

glomerate in core areas leading to the unequal distribution of benefits

in the countryside. This paper assesses and compares the regional

disparity as far as DFls are concerned amid the current and emerging

economic and industrial trends in the Philippines and Thailand. The

strategies and approaches the two case countries adopt to spur decen-

tralization of DFIs in the context of sustainable growth and develop-

ment are presented.

1. Introduction

Thailand and the Philippines as members of ASEAN have commoneco-

nomic and political aspirations. The flying geese theory in development

economics has always placed both countries and other ASEAN nations for

decades moving together, with Japan leading the flock closely followed by

the NIEs. But recently, the Philippines has lagged well behind her other

ASEAN neighbors, particularly Thailand. The annual GDP growth rate of

the Philippines for 1990-1996 was 2.8% and that of Thailand was recorded

19

20 KEIEl TO KElZAl

at 8.6%. Per capita income in Thailand is US$7, 535 as compared to US$

2,935 in the Philippines. In 1993-1994, DFI flows into Thailand tripled

valued at US$14. 47 Billion (B). Although the DFls into the Philippines in

creased by 331% during the same year, it however amounted only to US$

2.46 B.

The shift to outward-looking and export oriented strategies for develop

ment of Thailand and the Philippines has paved the way for the inflow of

direct foreign investments (DFls) specially to manufacturing. The DFls

have been the source of much of the wealth and export led growth of the

Asia Pacific region. Export growth rates of merchandise have reached dou

ble digits of 16.4% and 14.1% in 1995 for the Philippines and Thailand.

This paper will first deal with the theories of foreign direct investment pro

cess to have a better understanding of the relationship between the direct

foreign investment and the host country. Secondly, we will try to assess

these DFI inflows in the context of the current emerging industrial trends in

Thailand and the Philippines.

To improve the economic and social conditions of the people is one of the

prime goals of the DFI-Ied industrialization policies of governments in many

developing nations. One measure of development is the equal distribution of

the benefits of economic growth. With the inflow of DFI and the industrial

transformation that follows, majority of the population have not been reach

ed with the fruits of growth. These DFls have been claimed to have been

the engine for growth in both Philippines and Thailand that led them to

achieve impressive economic growth and increase in per capita income. And

Decentralization of Direct Foreign Investments: The Case of the Philippines and Thailand 21

yet policy frameworks may be self-defeating with the existing regional

disparity. Even in terms of location of DFIs and support facilities that grow

and develop with it, there is a tendency for the DFIs to agglomerate in the

core urban areas leaving the hinterland behind. Therefore the third aim of

this paper is to address this issue and see the reasons behind the regional

disparity in Thailand and the Philippines as far as DFI are concerned amid

the. current and emerging economic and industrial trends. And finally, in

light of this we will assess the strategies/approaches Thailand and the

Philippine governments adopt to spur decentralization of DFIs in the con

text of sustainable growth and development.

2. Theories of the Foreign Direct Investment Process

Direct foreign investments involve the interrelationships between the

transnational corporation and the DFI-receiving country (or host country).

The focus of this paper would be more on the host countries, specially

developing nations. The more common factors why countries invite DFI in

to their shores are for capital source, technology transfer, marketing know

how and network and employment generation. This will develop the skills

of the domestic workforce, and stimulate the local economy with new ideas,

skills and expertise. More prominent is the development of a local industry,

as the development of the semiconductor and electronics industry in Asia

during the past decade. An ultimate goal for the race to attract foreign in

vestors is to provide the stimulus for growth for their economies.

In the 1990s governments of developing countries have embarked on policy

reforms that are more open to direct foreign investments that include fiscal

22 KEIEI TO KEIZAI

incentives, export promotion, liberalization and more private sector par

ticipation. Studies were done by Reuber (1973) and Gusinger (1985) on

the impact of government policies on the flow of DFIs. Their research

states that there may be two kinds of DFIs: export-and domestic-market

oriented DFIs. They found out that tax incentives influence the footloose ex

port-oriented DFIs and tariff rates influence the latter.

Various theories are formulated to explain the FDI process. One hypothesis

presented is in line with the international product life cycle theory

developed by Raymond Vernon. This theory states that at the maturing pro

duct stage, there is global diffusion of the product initially through exports

and then by overseas production via direct foreign investments from the

country when the innovation came from to other countries, initially to coun

tries of the same income level as the innovating country and later on to

developing countries. At the standardized stage, during which price deter

mines the product competitiveness, DFIs flow into low cost countries.

Firms from these DFI sending nations were looking for overseas production

sites for sales expansion, resource acquisition and diversification purposes.

The firms choice of doing overseas production, whether as market serving

or supplying seeking strategies, as Boddewyn (1987) indicated, is founded

on a more central purpose of profit maximization. Hence the firm's pro

fitability hinges not mainly on the cost of resources and the market size but

also on the efficiency of the labor, and the domestic institutions and in

frastructure at work. In the same context risk minimization is one of the con

cern of the DFI firm such that they look for a favorable business environ

ment: political and social stability, and sound macroeconomic fundamentals.


Ramstetter (1993) however points out that foreign affiliates of MNCs by

virtue of operating abroad as compared to their parent company possess

locational-advantages and-disadvantages. The advantages he outlines were

consistent with other experts: proximity to market, ability to circumvent

protectionism, and access to low cost labor, raw materials and intermediate

goods. The foreign affiliates specially those who decide to locate in develop

ing economies are most often faced with inadequate or inefficient infrastruc

tures, either social or physical. For the internationally competing firm, this

could later on serve to increasing costs.

The eclectic theory of Dunning (1977) expounds that the decision for DFIs

is based on three parameters: (a) Ownership advantage, (b) Location ad

vantage and (c) Internalization advantage. The ownership advantage refers

to the competitive advantage the firm has which can be broadly categorized

into product technology, marketing resources and managerial expertise vis

a vis its rival. In the case of the locational advantage, the cost, risk and con

ditions in the investment receiving country are looked into. This includes

the availability, quality and price of factors of production, infrastructure,

populating growth, etc. And lastly, internalization ascribes to the advantage

in terms of marginal return to investments the firm would get if it operates

the foreign operations by itself.

Dunning's theory relates the DFI flows to a country to the level of the loca

tional advantage. Lecraw (1991) on the other hand adopting a similar con

cept made a systematic study to identify the factors that influence the DFI

decision of multinational firms (MNCs) but putting emphasis on the

changes in the locational advantage rather than on the level per se. In other

24 KEIEl TO KElZAl

words, it is the change in wage rate and not the wage rate that Lecraw takes

into account in his work. His study results indicated that locational factors

such as value of the natural resources, rate of growth of the labor force, con

sumption growth rate, risk, real exchange rate, tariff rate, tax rate and the

openness of the country's investment incentives all influenced the inward

flows of investment. But interestingly changes in the level of infrastructure

were found not to have significant impact on the DFI flows.

The current investments across transnational borders by many multina

tional firms facilitated by the improvements in communications, transporta

tion are very important for them to remain internationally competitive. DFI

receiving economies likewise have the desire to be part of the global

economy, linked with the global network specially in terms of market.

Hence amid global competition, foreign firms access to infrastructure like

ports, airports, telecommunications and power in the host countries,

necessary for them to efficiently conduct international business is very vital.

For another, many local firms seek alliances and joint ventures with foreign

firms wanting of capital, technology and management expertise which the

governments encourage, to expedite the development of certain industries

specially those that have just been liberalized and are needed in such haste

to sustain development.

3. Current Emerging Economic and Industrial Trends in

Thailand and Philippines

3. 1. Industrial transformation till the 1990s

Agriculture was the largest sector in Thailand and the Philippines until the


1960s. There was a dualistic agricultural sector that was comprised of a sub

sistence and a commercialized agriculture. Industrialization adopting in

ward looking and import substitution strategy behind protective walls and

tariff structures started in the Philippines as early as late 1940s and

Thailand followed suit in the late 1950s. The main purpose of this strategy

was to protect infant industries and to produce for the domestic market.

Thailand and the Philippines pursued export oriented industrialization

policies in the early 1970s that include the a). introduction of new invest

ment laws like giving special treatment to foreign investors in export activ

ities, b). adjustments in the investment incentives system like the offering of

attractive tax concessions to manufacturers of export products, c). changes

in the tariff structure including duty free imports of raw materials and in

termediate inputs for export manufacturing, d). the establishment of export

processing zones (EPZsl») and e). extensive deregulation.

The new international division of labor had multinationals (MNCs) in

vesting overseas seeking for cheaper factors of production. In the 1980s

there was industrial expansion induced by DFIs from Japan and the NIES.

The appreciation of the yen after the Plaza Accord of 1985 and industrial

restructuring in the other industrialized countries further boosted the flow

of DFIs into ASEAN and led to a transformation of these countries'

economies and industrialization processes. Thailand and Philippine govern

ments embarked on an export-oriented manufacturing strategy for develop-

l) Export Processing Zones (EPZs)-Customs-controlled enclave where industries are

allowed to import raw materials and export finished goods free of duties, taxes and other

import restrictions. The site is developed to accommodate facilities for manufacturing

and other industrial purposes.

26 KEIEI TO KEIZAI

ment through the offering of trade and investment incentives. Raw

materials and labor costs were inexpensive in both countries but the stable

economic and political situation in Thailand made it one of the favorite

destinations of DFIs.

In Thailand in the 1950s, agricultural production of rice, cassava, maize,

teak, rubber and others provided about three fourths of total merchandise

exports and accounted for one third of the GNP. During 1960-1970, most

foreign companies invested in industries producing for the local market and

for import substituting products. In the 1980s investments were more on ex

port oriented industries.

The DFI inflow to Thailand skyrocketed to over US$2 B in 1990-1991 from

US$200 Million (M) in the mid-1980s. As a result there was a remarkable

growth in manufactured exports in processed foods, electronics and elec

trical appliances, automotive, machinery and equipment, garments, textiles

and footwear and toys. Manufactured exports as a share of GDP rose from

33% in the 1980s to 75% in 1990-1991. Exports in 1980 were mainly

agricultural in nature comprising 47% of total exports; manufacturing

however rose dramatically from 32% in 1980 to 82% in 1995 (Figure 1).

Figure 1. Sectoral Shares of Exports, Thailand.

1980

Manufacturing Others

Mmi,g~ 11.6% ",wrt;r

0.05% Fish~g Agriculture 4.2% 46.9%

1995

Others

~~ure Fishing 5 % Forestry 0.06% Mining 0.5%

Manufacturing 82%

Source: Bank of Thailand


The rise in investments in the manufacturing sector called for the develop

ment of supporting industries. The local industries however did not possess

the financial and technical capability to provide the required standards and

quality that the manufacturing sector for parts and components, and raw

materials may require. As a result the firms had to resort to two alter

natives. One is to import them from their home country or overseas sub

sidiaries. Another is for the suppliers of major manufacturers to follow and

do foreign investment in the country. The local content requirement was

put into effect to promote local industries. This may not be an effective

strategy in two counts. First, the local supporting industries are weak. And

second, many of the DFIs, of which more than 80% of production are

geared for the export market locate in the export processing zones (EPZ) .

One of the provisions of EPZ is that importation of raw material and equip

ment are exempted from tariffs.

In both economies, their comparative advantages during the early 1950s

were founded on natural based resources. In the Philippines it was based on

sugar milling and coconut oil mills. This is the reason why the country had

to import a lot of finished and semi-finished consumer goods and eventually

led to the reduction in the country's international reserves. Hence in 1949,

the government implemented import control to correct this problem, star

ting the import-substitution nature of industrialization in the Philippines. Im

ports of consumer goods were reduced only to be replaced by the importa

tion of raw materials, intermediate and capital goods needed by the new im

port substituting industries such as textiles, transport equipment, electrical

appliances, non-electrical machinery and metal products needed during the

1953-1960. During this time the economy was highly dependent on the

28 KEIEl TO KElZAl

country's traditional exports like copra, sugar, logs and lumber, and canned

pineapple and mineral products which accounted to 85% of exports in 1960.

Apparently these new import substituting industries were imported input-in

tensive and yet unable to generate enough foreign exchange earnings to pay

for the imports giving rise to the balance of payments crisis. This called for

a decontrol or the cancellation of import control and the government in

stituted other policies: devaluation of the peso, and tariffs to replace import

quotas in 1960.

In the 1970s manufacturing output grew at an average of 7%. Export earn

ings were still from the traditional exports and garments; and semi-conduc

tors became the Philippines' biggest export. In the 1980s, foreign debt ser

vicing ate up most of the dollar earnings that led to an economic crisis caus

ing manufacturing to contract by 7.5% in 1985. Up to the 1990s, almost 50

% of DFI stocks were in manufacturing, mainly on chemicals, food, basic

metals, transport equipment and textiles.

The Philippine economy grew at a slower pace in the 1990s. The country

was considered by many DFIs as a political risk area that they shied away

from the Philippines durings the height of overseas investment inflows into

Asia from the mid-1980s. The manufacturing sector grew overpassing that

of the agricultural sector. Electronics, transport equipment and chemicals in

dustry which were practically negligible in the past contributed much to the

growth of the manufacturing sector.

Philippine exports have always been categorized as traditional and non-tradi

tional exports. The former, mainly primary industry based increased very


slightly (15%) but the non-traditional exports increased 285 times during

the decade 1985-1995 attributed specifically to the exports of electric and

electrical equipment and parts and components, garments, machines and

transportation equipment and miscellaneous manufactured articles (Table 1) .

Table 1. Philippine Exports by Major Commodities, 1985 and 1994.

Exports 1985 Exports 1994 Commodities Value Million Value Million

US$ (Percent) US$ (Percent)

Traditional Exports 1298(28) 1505(11)

Coconut products 459(10) 607(5)

Sugar and sugar prods. 185(4) 77 (.5)

Forest products 199(4) 26(.2)

Mineral products 243(5) 436(3)

Fruits and vegetables 135(3) 184 (1)

Abaca 17 (0.4) 20 (.1)

Tobacco, unmanuf. 24 (0.5) 23(0.2)

Petroleum products 39(0.9) 132 (1)

Non-traditional exports 3277(71) 11723(89)

Manufactured 2767(60) 10917(83)

Elec. and elec. eqt./parts, and telecom 1056(23) 4984 (38)

Garments 623 (14) 2375 (18)

Textile yarns and fabrics 39 (0.8) 173 (1)

Footwear 39(0.8) 176 (1)

Travel goods and handbags 10(0.2) 76(0.5)

Wood manufactures 43 (0.9) 129(0.9)

Furnitures and fixtures 84 (0.2) 240(2)

Chemicals 150(3) 306 (2)

Copper metal 168(4) 270 (2)

Non-metallic mineral manufs. 24 (0.5) 96(0.7)

Mach. and transport eqt. 30 (0.7) 469 (4)

Proces. food and bevers. 106(2) 335 (3)

Misc. manufactured articles 136(3) 518(4)

Others 259(6) 770(6)

Non-traditional Manufactures 510(11) 806(6)

Total Exports 4575(100) 13228(100)

Source: NEDA Statistical Yearbook, Philippines, 1995.

30 KElEl TO KElZAl

3.2. Current industrial trends

Philippines and Thailand are two countries in Asia who were recipients and

have benefited from direct foreign investments (DFI) from US, EU and

Japanese firms from the 1980s, the first wave of investments in Asia during

the 1980s. Likewise they were the recipients of the second wave of DFls

from the ANIES (Korea, Taiwan Hongkong and Singapore) that followed

suit. Now Thailand, together with Malaysia are among the third wave of in

vestors. Foreign firms saw the locational advantage of Thailand as a

gateway to the big and untapped Indo-Chinese markets of Vietnam, Laos,

Cambodia and Myamnar. And yet Philippines still boasts of its highly skill

ed English speaking workforce. They have both reduced the investment bar

rier and improved the business climate conducive for investments. Their

governments had adopted strategic reforms to become part of the global

economy. Many countries including Thailand and the Philippines used to

bank on the labor intensive manufactured exports. But recently, they can

not just count on cheap labor alone since labor costs are rising faster than

productivity (Figure 2).

In 1996, there was a slowdown in exports (Figure 2) and subsequently the

growth rates in the Asian region much attributed to the drop in chips prices

by almost 95% worldwide as well as currency fluctuations. Computer and

computer parts and components and electronics form the backbone of many

Asian countries: electronics account for 70% of Singapore's exports, 50% of

Malaysian exports, and one third of Korean and Philippine exports that

make them very susceptible to price fluctuations.


Figure 2. Wage Productivity and Export Growth Rates in Selected Asian Countries .

ASIA'S EXPORT GROWTH IS SLOWING ...

HONG KONG

~APORE

~UTH KOREA

~ ~ILAND

~SIA

MALAYSIA

PHILIPPINES

CHINA : -

ANNUA L CHAN~E EXPORTS: IN

.19~4

.19~5 • "96 EST.

:

... WAGES ARE OUTPACING PRODUCTIVITY ... HONG KONG

PHILIPPINES

INCREASE~ IN WAGES AND PRODUCTIVITY,

1985,-1995 : .WAGES ,

.PROOUCTIVITY •

o 10 20 30 40 0 125 250 375 500 ~PERCENT DATA: CEIC, ING BARINGS ~PERCENT DATA: JARDINE FLEMING RESEARCH

Source: BusinessWeek, October, 2, 1996.

Paul Krugman of Stanford University, once stated that East Asia was good

at mobilizing cheap labor and foreign capital but do not have the productivi

ty and innovation to sustain growth. He further stressed that once these "in

puts" are exhausted, the growth of the countries will be affected (Business

Week, December 2, 1996). For years, 1994-1996, Asia's export growth has

declined. Specially now that we are on to the next millennium, East Asia is

still beset with rising costs, shortage of skills and expertise, and infrastruc

ture deficiencies. Hence many countries in Asia including the Philippines

and Thailand are rethinking their strategies and are now concerned with the

development of human capital to be more innovative and creative, and the

shift to higher technology industries.

Recent trends in Thailand

Thailand is now moving into the production of more sophisticated products

32 KEIEl TO KElZAl

such as plastics, chemicals, auto and auto products and electronics and are

trying to streamline in low end industries like toys, footwear and

agriculture-based products. The government believes that to expand the

medium technology industries, alliances with MNCs are at this stage

necessary. Hence the BOI policy groomed a network of auto parts suppliers

that made General Motors last year to locate in Thailand instead of the

Philippines and of electronics parts suppliers that attracted IBM to

Thailand as well. Large scale and capital intensive industries are now in

Thailand. Capital intensive industries like car manufacturing need more

permanent plants and equipment that a carefullocational decision has to be

made.

Thailand is the most advanced production base for cars in Southeast Asia to

the extent that local parts contents of Japanese cars are now 60 to 70%

although the legal requirement stands at only 54%. This is one reason why

many car manufacturers like Toyota, Honda, Ford-Mazda, Chrysler and

GM decided to continue or start car manufacturing/assembly in Thailand.

In 1996, more than 70 major Japanese auto-parts manufactures are

operating in the country. The use of locally produced parts and components

will thus make the car manufacturers less vulnerable to foreign exchange

risks. For another, Thailand has a large domestic car market and is

strategically located in the center of Asia and adjacent to the Indo-chinese

market. In support of the car industry, Thailand is slated to come out with

its first cold roll steel mill which would provide the local car manufactures

with the steel sheets by 1998.

Another fast growing industry in Thailand is the petrochemical industry


which has been attracting the attention of many petrochemical companies.

The growth in the manufacturing sector and the thriving textile industry

has created a big domestic demand for plastics. There are moves by the

government to liberalize the sector except for the upstream aromatic pro

ducts. The raw materials used in the production of plastic products, called

polymers, are ethylene and propylene. Domestic production of these

polymers are undertaken by the National Petrochemical and Public Co.'s

NPC-l and NPC-2, Thai Dlefins Co. and plans are there for new entrants:

Siam Cement, Thai Petrochemical Industry, and Mitsubishi-Thai govern

ment joint venture.

The Thai government has made the list of acitivities eligible for investment

promotion and this includes the following: agriculture and agricultural pro

ducts; minerals, metals and ceramics; light industries; metal products,

machinery and transport equipment; electronics and electrical industry;

chemical industry, paper and plastics; and service and public utilities which

are open for foreign investments.

Exports of garments, computer parts and components, electrical appliances,

plastics products and ICs have boosted manufacturing. Agro-industries

together with manufacturing account for 93 per cent of total exports in 1995. High

value added agro-industrial products such as frozen shrimp, frozen chicken,

canned tuna, canned fruits and vegetables, cut flowers, and the traditional

exports of rice, tapioca, sugar, rubber, etc. have been part of the top 20 ex

ports.

In pursuit of the shift to more knowledge based industries Thailand

34 KEIEI TO KEIZAI

however is faced with a shortage of engineers, technicians and managers

needed to develop the electronics, machinery and specialty steel industries.

Rise in wage levels in the country has forced labor intensive industries such

as garments, shoe and toy firms to relocate in low wage Vietnam, China and

Burma.

The W orId Bank estimates that the Thai government needs US$154 B to

remove bottlenecks in its infrastructure. Hence the government with

limited funds has turned to the private sector. Water systems, expressways,

container terminals, aviation, power and telecommunications services are

being developed under the BOT scheme. The private sector likewise is in

volved in the setting up of industrial zones that will have the infrastructure

tailor made to suit the needs of specific industries, e.g. auto assembly. Part

nership between the government (through the state owned Telephone

Organization of Thailand) and the private sector (through ad-hoc contract

basis) to improve telecommunications to the extent of putting up fixed lines

communication in the rural areas. Other services and public utilities are

eligible for investment promotion: tourism, air and water transport services,

hotels, housing, agricultural export zones, educational institutions and voca

tional training centers, hospitals, etc.

Private sector involvement in the industrialization process of Thailand has

been included in the First (1961-66) and Second Development Plans (1967-

1971). But relying on the private sector is not without problems and faults.

There is sometimes the conflict between contractors and regulators, and the

conflict between the profit maximizing goals of the private sector and the

social responsibility of the public sector.


Recent trends in the Philippines

The Philippine's 1996 Investment Priority Plan (IPP) lists the preferred

areas of investments eligible for fiscal and non-fiscal incentives and addi

tional incentives if they locate in any EPZs. The activities include the follow

ing: export-oriented industries that have to export at least 50% of produce

(e.g. export producers, services for export, export trading, agro-export pro

cessing estates etc.); catalytic industries that show potentials of developing

into an export-oriented industry since they have comparative advan

tage(e.g. fine jewelry, processed foods, shipbuilding and repair, drugs and

medicine, production of planting materials, breeders, etc.); industries

undergoing industrial adjustments which have been affected by the restruc

turing of tariffs, the adverse effects of which may be overcome with the use

of new technologies (e.g. textiles, organic chemicals, sugar mills and refin

ing, packaging materials, machinery and equipment, parts and components,

coconut mills and refineries etc.); and support activities that include in

frastructure, services, environmental support facilities and research and

development projects and support to government projects (e.g. industrial

estates, industrial communities, power generation and transmission, com

mon carriers, telecommunications, industrial ports, waste management con

trol, research and development, agricultural services, etc.).

With the expected continuos growth in the Philippines, the demand for ther

moplastics and synthetic fibers are expected to increase as well. Although

the petrochemical industry is a decade behind compared to Malaysia,

Singapore and Thailand, the government has a Master Plan to develop the

petrochemical industry. From 1991-1994, the BOI has approved 17 pioneer-

36 KEIEl TO KElZAl

ing projects ranging from monomers to intermediates and in 1996, top

domestic firms and Sumitomo Corporation have signed a consortia to deter

mine the commercial vialability of a polyethylene project to meet domestic

and export demand.

The Philippines has a long history of protectionism and monopolies which

the government is. seeking to eliminate through deregulation and privatiza

tion. The financial industry is deregulated that for the first time in more

than 40 years foreign-owned banks are allowed to operate in the country.

Ten foreign banks have been granted full banking operations with the re

cent approval of the law liberalizing foreign banking. The monopolies in

telecommunications, and shipping have also been broken. Local enterprises

as well as foreign investors are encouraged to compete with home grown

business groups which have long enjoyed government protection. The im

pressive list of measures includes the progressive deregulation of the

telecommunications, oil, airline and shipping industries. Mining was opened

to foreign investors and soon the retailing sector. The retail sector is likewi

se being deregulated to spur competition and improve consumer welfare by

providing a wide variety of quality goods and services at reasonable prices.

In addition to these policy changes, urgent initiatives are underway to bring

about a more solid base for economic growth, this time with the active par

ticipation of the private sector in the context of competitiveness and efficien

cy. To this end; schemes such as privatization and the Build-Operate-

2) Build-Operate-Transfer(BOT)-A Private party agrees to finance, construct, operate

and maintain a facility for a specified period of time and then transfer the facility to a

government and other public authority.


Transfer (BOT) 2) are being implemented. This has successfully attracted

foreign firms to take part in BOT in infrastructure projects such as power,

IEs, ports, airports and telecommunications.

Due to all these structural changes, many domestic firms in the telecom

munications and retail sectors have partnerships with foreign firms for

capital and technical know-how. Likewise through the BOT schemes DFls

could indulge in the development of power plants and industrial estates.

The Cojuangco-owned Hacienda Luisita for example is joining up with

Itochu Corporation of Japan and a local bank, Rizal Commercial Banking

Corporation to establish a second industrial estate in Region IIP). The

Laguna Technopark, an industrial estate in Region IV, is jointly owned by

the Ayala Land, Mitsubishi Corporation and Kawasaki Steel. Hongkong's

Consolidated Electric Power Asia (CEP A), a subsidiary of Hopewell Cor

poration and Mitsubishi Corporation of Japan have BOT projects in dif

ferent regions to develop power generation facilities.

4. Nature, Motivations and Direction of DFls

FDI flows into the Philippines and Thailand in early times were mostly

resource exploitation and development. They shifted to manufacturing for

the domestic market in the 1960s and 1970s according to the import

substituting development strategy; and manufacturing for export in the 1980s

with the advent of some liberalization policies adopted after 1985. And in

3) The whole archipelago has been divided in to the National Capital Region (NCR), the

Cordillera Autonomous region (CAR) and 12 other regional districts.

38 KEIEI TO KEIZAI

the 1990s labor-intensive industries such as textiles and garments and pro

duct cycle investments such as electronic-electronic products took the place

of resource base processing as favorite investment for foreign firms.

As mentioned in the earlier section, DFls can either be domestic market-or

export market-oriented and the determining factors for their inflows differ.

For the former obviously the market and market potential are the most im

portant determinant (Yue,1993). The host country's trade policy is the

basis for locational decision for DFls since it is with import restrictions for

example that assure the market size and access. On the other hand, export

oriented DFls have to take into consideration their international com

petitiveness for their locational choice. Hence foreign sourcing in terms of

cost of labor and factors of production are important ; so are access to

markets and raw materials and part and components and the exchange

rates.

Since many of the DFls in ASEAN after 1985 were export-oriented in

nature, Thailand and the Philippines just like the other ASEAN countries

established industrial estates and export processing zones that provide well

developed infrastructure and fiscal incentives. And lately the fast changing

development in technology, informatics, transportation and telecommunica

tion has brought about new production technology and methods which do

not rely mainly on cheap labor and raw materials. More recently the need

for well developed infrastructures (e.g. energy, ports, airports, telecom

munications, logistical support) that the DFls need to do international

business have emerged. This is in line with the governments desire to be

part of the global business exchange network.


4. 1. DFls in Thailand

In Thailand, in 1971-1975, the manufacturing sector received 28% of the

DFI of which the textile sector got 46% share, followed by the food

manufacturing sector (14%) and electrical appliances (13%). The next

five years till 1980, showed manufacturing share of total DFIs increasing by

26% but this time the investments in electrical appliances skyrocketed by

274% and textile sector coming in second although its share of DFIs has

declined to 20%. In 1980-1985, DFIs in the textile and food sectors con

tinued to decline, the electronics sector still on top but by this time in

vestments in chemicals started to increase by 188 % and petroleum pro

ducts from Baht 56 M to Baht 2 B. And from 1985 foreign companies were

interested in export industries, mostly small and medium industries dealing

with electronic appliances. Thailand in the second half of the 1980s had a

comparatively favorable economic growth as her ASEAN neighbors. A

survey of direct foreign investors in Thailand conducted by the Assumption

University in 1996 revealed that the three most important factors that in

fluenced their investment decisions are: 1). political stability, 2). market

size and 3). labor costs.

Total DFIs in Thailand in 1995 was valued at Baht 4l1B an increase of 43%

from the previous year of Baht 148 B accounting for 615 projects an increase

of 21% from the 507 approved projects in 1994. Japan still remains the top

foreign investor for the consecutive year 1993-1995, in terms of value and

number of projects. In 1995, Japan's investments comprised 48% (valued at

Baht 197 B) of total DFIs, followed by the US (16% valued at Baht 64 B)

and Taiwan (11% valued at Baht 45 B) (Figure 3). Thailand is most attra-

40 KEIEI TO KEIZAI

tive for automotive companies such Toyoda, Honda, Mazda and Mitsubishi

who have assembly plants in Thailand, aside from the support industries

that follow these big car companies.

The number of applicants for the year 1994-1995 did not vary much but the

in 1995 more of the investments were in large scale projects like rolled steel

iron, petrochemicals, chemical and paper, industrial estates and power. In

1995 too there was a shift to major higher technology industries such as elec

trical and electric products, metals and machineries and transport equip

ment and medical products, plastic and paper from the light industries that

prevailed before.

Figure 3. Foreign Direct Investments: Applications Approved, Thailand,

1995 (Billions Bahts).

Others

Italy

Switzerland

N ether lands

Germany

Malaysia

Hongkong

UK India

Australia

Singaporejlimlllliilliilllliilliililiiliiiill

KoreaJmm __ IllliilliiD

Tai wanjmliillmlliillmlliillml_ US.----Japan~~~~~~~~~~~~~~~~~~~~~

o 50 100 150 200

Source: BOI, Thailand.


Of the 615 projects approved, only 8 were investments of at least Baht 10,000

M although investment amount was Baht 143 B or 34 per cent of total in

vestments for approved projects. Whereas the projects with less than Baht

10,000M number 607 accounting for 65 per cent of the total investments.

This indicates that most of the projects are more or less large scale in nature

rolled steel, chemical products and sponge iron. The BOI of Thailand in 1995 ap

prove projects of which the chemical products, paper and plastics had the

biggest investment (Baht 171 B); next is minerals and basic metals (Baht116 B)

and then metal products, machines and transport equipment (Baht 47 B) . In

1993-1995, 45-55% of foreign applications and approvals were export-

Table 2. Foreign Investment Projects Approved by the BOI, Thailand,

1993-1995. Unit: Million Baht

Year 1993 1994

Sector No. of Share in Investment Share in No. of Share in Investment Share in

Projects Total(%) Total(%) Projects Total(%) Total(%)

Agricuiltural Products 44 11. 7 4,186.8 3.9 52 10.3 5,700.4 3.9

Minerals and Ceramics 17 4.5 6,055.7 5.6 25 4.9 27.504.8 18.6

Light Industries/Textiles 106 28.1 10,732.6 9.9 73 14.4 6,043.2 4.1

Metal Products and Machinery 54 14.3 7,312.1 6.7 98 19.3 19,056.4 12.9

Electric and Electronic Products 91 24.1 16,867.6 15.5 126 24.9 32,634.4 22.1

Chemicals and Paper 29 7.7 11, 493. 2 10.6 93 18.3 39,152.0 26.5

Services 36 9.5 51, 836. 5 47.8 40 7.9 17,662.0 12.0

Total 377 100.0 108.484.5 100.0 507 100.0 147,753.2 100.0

Year 1995

Sector No. of Share in Investment Share in

Projects Total(%) Total(%)

Agricultural Products 69 11. 2 10,768.3 2.6

Minerals and Ceramics 43 7.0 115,961. 6 28.2

Light Industries/Textiles 50 8.1 7,703.7 1.9

Metal Products and Machinery 138 22.4 47,431. 5 11. 5

Electric and Electronic Products 139 22.6 40,181. 4 9.8

Chemicals and Paper 130 21.1 170,891. 9 41. 6

Services 46 7.5 17,960.8 4.4

Total 615 100.0 410,899.2 100.0 Source: BOI, Thailand.

42 KEIEl TO KElZAl

oriented projects, decreasing to less than 40% share in 1995. It can be seen

in Table 2 that DFIs in agricultural product related and light industries and

textiles projects have been declining since 1993 till 1995. Hence it can be

deduced that light industries and textile projects which have small amount

of investments and labor intensive have found other locations. Recently

foreign investors have been looking for other countries where wages are

cheaper such as Vietnam, China and Laos.

Thai nationals have to hold at least 51% of the registered capital for in

vestments in agriculture and fisheries, mining and the service sector. If the

project exceeds Baht 1, 000 M foreign investors may initially hold a majority

or all of the shares but the Thai people must get at least 51% of the shares

within five years of start of operations. For manufacturing, Thai nationals

have to have at least 51% of the registered capital if production is geared

for the domestic market except when they will locate in Zone3 in which case

100 ownership is allowed. When more than 50% of sales are for export, the

foreign investor may hold majority stocks and all the shares if more than 80

% of sales are derived from exports.

4. 2. DFls in the Philippines

In the Philippines policy reforms were implemented to improve the business

climate not only for local corporate activity but most specially for foreign in

vestments. For future economic growth DFIs are essential in as much that

the country has debts to service and low domestic savings rate. The govern

ment thus enforced policies to attract DFIs which are increasing but still fall

short compared to the large inflow into other Asian neighbors.


Various measures have been adopted to attract foreign investments. More

areas have been opened to 100% foreign ownership and procedures for star

ting and doing business in the country have been simplified. Recently

minimum equity requirements for investors were lowered from U$500, 000

to U$150, 000. Efforts are also directed toward the elimination of the

"Negative list" which serves to protect some sectors from foreign investors

except for media and broadcasting.

All investors and enterprises enjoy basic rights such as:

i ). freedom from expropriation without just compensation

ii). the right to remit earnings from investments and capital gains

and dividends within the guidelines set by the Central Bank

iii). the right to repatriate the proceeds of the liquidation of invest-

ment

iv). the right to obtain foreign exchange to meet principal and in

terest payments on foreign obligations.

Although the Constitution prohibits the ownership of land by foreign na

tionals, foreign companies may lease the land they occupy for a period of 50

years renewable for another 25 years. In the event that the Condominium

Law is passed, foreign companies can own their plant facilities and become

stockholders of the company in the areas designated as industrial estates

assuring the company of permanent status.

The equity investments approved by the BOI are shown in Figure 4. From

1991 to 1995, the total cumulative equity investments amount to Pesos 387

44 KElEl TO KElZAl

B, 60% (Pesos 234 B) contributed by the local and 40 % (Pesos 153 B) by

foreign contributions. The top three cumulative individual country investors

in the Philippines for 1991-1995 were: the US (Pesos 41 B), Japan (Pesos 16 B)

and Great Britain (Pesos 13 B).

By sector, investments were concentrated in the manufacturing sector dur

ing the past decade in the cumulative amount of Pesos 698 B. The govern

ment indulged the involvement of the private sector in the public utilities

development highlighted in 1995 giving rise to an accumulated investment

of Pesos 84 B (Figure 5).

The biggest investor for 1995 still remains the US (Pesos 16B). Surprising

ly, Thailand (Pesos 9. 7 B) and Saudi Arabia (Pesos 15 B) came in second

and third (Figure 6). Four hundred seventy nine projects were approved

with costs in the amount of Pesos 335 B. The biggest share of the equity in

vestments went to manufacturing (Pesos 57 B) and public utilities (Pesos

2. 6 B). Most of these foreign equity investments in manufacturing worth

Pesos 34 B were directed to petroleum products, plastic products, construc

tion and housing components, fabricated metal products, machinery and

equipment, electrical and electric products and motor vehicle parts and com

ponents. In the first quarter of 1996, 144 projects worth Pesos 70 B were ap

proved wherein the manufacturing sector (specially construction and hous

ing components) garnered most of the investments valued at Pesos 27 B,

and public utilities and tourism coming in second and third with in

vestments of Pesos 23 B and Pesos 7 B, respectively (Figure 7).


Figure 4. BOI Approved Local and Foreign Equity Investments, Philippines,

1991-1995.

Pesos (bil. )

1991 1992 1993

Source: BOI, Philippines.

1994 1995

I Total Equi ty DLocai Equity DForeign Equity

Figure 5. BOI-Approved Cumulative Equity Investments by Sector, Philippines,

1985-96.

MANUFACTURING 290,096.70

PUBLIC UTILITIES ENERGY-RELATED PROJS 84,256.89

TOURISM-ORIENTED SER 61,243.35

27,201.06 01996 MINING 16,443.00 1m 1995 INFRASTRUCTURE

SERVICE .1994 AGRICULTURE D 1993 FISHERY

REAL ESTATE [J 1992

COMMERCE 3,484.45 .1991 FORESTRY

CONSTRUCTION 1,503.08 D 1990

MVDP 1,380.99

D 1989 1,260.51 EXPORT TRADERS

598.51 01988 R&D PROJECTS

521.66 SERVICE EXPORTERS ~ 1987

REGIONAL HQS 453.10

D 1986 216.52 FINANCIAL INSTITUTION 172.45

ENVIRONMENT PRTECTN 166.43 PD 1469

9.75


46 KEIEI TO KEIZAI

Figure 6. Foreign Equity Investments Per Country, Philippines

1995 (Million Pesos).

U.s.A iilli~i~==~;;::"::" _____ 16,147.489 THAILAND 9,709.862 SAUDI ARABIA 7,578.090

GREAT BRITAIN 3,213.454 JAPAN 2,602.785

HONG KONG 983.160 LIBERIA .594.179

AUSTRALIA.400.706 TAIWAN 349.386 CANADA 274.241

MALA YSIA 158.068 NETHERLANDS 143.802

SINGAPORE 95.905 S. KOREA 56.944

RESIDENT CHINES 42.267 PROC 39.207

FRANCE 37.783 NAURU 34.365

GERMANY 21.618 INDIA 8.416

SWITZERLAND 8.016 VIRGIN ISLANDS 2.550

BELG ruM 1.443 WESTERN SAMOA 1.300

ISRAEL 1.291 DENMARK 1.275 BAHAMAS 1.250

ITALY 0.480 INDONESIA 0.375

OTHERS )ii------ 5,602.778


Figure 7. BOI Approve Projects, by Sector, Philippines

1996 (Thousand Pesos).

Tourism -oriented 6,582,480

Public Utilities 22,981,341


Manufacturing 26,980,592


With adequate supply of English speaking workers and engineers in the

Philippines, and still abundant cheap land, more investors in electronic and

auto parts are locating in the Philippines. Electronics firms from Japan, the

US and the UK have been teeming to the Philippines. DFls valued at US$850 M,

specially in the electronics sector grew from US$64, 000 in 1992 to US$2. 1

M in 1996. The electronics and semiconductor firms such as Intel, NEC,

Hitachi and Toshiba put in US$948M and Sanyo alone opened a US$30 M

semi-conductor manufacturing plant in 1996. Mastushita Electric Philip

pines Corporation has inaugurated its new plant to produce electric ap

pliances with a total project cost of Pesos 400 M. These two sectors con

tributed 40 % to the total exports of the Philippine during the first half of

1996. Electronics have been the biggest export component valued at USS$ 7

B out of the US$17. 4 B total exports.

Japanese car companies such as Toyota, Honda, Nissan and Mitsubishi ac

count for 80 % of cars assembled in the Philippines. Car companies see a

bright prospect for the car market in the Philippines hedged its bid to have

a hold in the market by bringing in 10 suppliers to invest Pesos 1.27 B.

Many investors indicated that the deciding factors in the choice of locating

in the Philippines are: sound economy, quality and skilled and highly

trainable labor and tax incentives. Futhermore, many believe that the

economy will change with the deregulation of the power, finance, telecom

munications, shipping and the oil sectors.

48 KEIEI TO KEIZAI

5. The Issue of Regional Disparity

5. 1. The Thai experience

The economic boom both in the Philippines and Thailand has created

disparity between the people in the rural areas and the core urban areas.

The 20 % well-to-do members of the population mostly residing in the

Bangkok area get more than half of the national income. The low income

people comprising 20 % of the population get a mere 4%. In 1994, the per

capita income in Bangkok and vicinity was Baht 186,000 whereas the per

capita income Northeastern region was as low as Baht 20,235 (Table 3 and

Figure 8). But among the changwats in regions there are core urban areas

where per capita income is higher such as Chon buri (Baht 208,000) and

Rayong(137,846) in the Eastern region, Phuket (Baht 108,652) in the

Southern region.

Table 3. Gross Regional Per Capita, Thailand, 1994.

Regions Per Capita GRP

(000 Bahts)

Whole Kingdom 61,335

Bangkok area 186,167

Eastern 100,321

Central 57,022

Western 46,028

Southern 39, 789

Northern 31,064

Northeastern 20,235

Source: Office of the National Economic and Social Development Board.

Decentralization of Direct Foreign Investments: The Case of the Philippines and Thailand

Figure 8. Per Capita Gross Provincial Product, Thailand 1993.

C-.~ '""\

lS"N

Andaman

5 ea

10"N

104"E

THAILAND PER CAPITA

GROSS PROVINCIAL PRODUCT

Gulf

of

Thailand

1111111

(j)PathumThani-14S,366

<2l Nonthaburi- 94, 364

alSamut Sakhon-113, 726

<I)Samut Prakam- 226, 672

Baht 100,000 and above

40,000 - 99,999

20,000 - 39,999

19,999 and below

--= River

Provincial Boundary

Regional Boundary

'-'-" Intemational Boundary

(Boundaries not necessarily authoritative)

", I

49

lS"N

10"N

Source: Office of the National Economic and Social Development Board, Thailand"

50 KEIEI TO KEIZAI

About 70% of manufacturing are concentrating in Bangkok and the surroun

ding areas, with low level of industrialization and low income in the rural

areas that become push factors for people to move to urban areas. Income in

the northeast was 10.2 lower than those in Bangkok in 1991. This gap in

creased to 11. 2 times in 1993 and to 11. 9 times in 1994.

The main strategy of the government to correct this is to encourage in

dustries to move out of Bangkok to the regions. Industry would move to the

less developed areas only if the infrastructures are in place. Hence, the

highways and the railway are being expanded and strengthened to connect

the new deepwater port east of Bangkok. Power and telephone services are

likewise being improved. Another approach the government deems impor

tant to improve and remove regional imbalance is education in the rural

areas. Access to, better and lower cost of education throughout the country

is top in the priority program. Students loans are available to less privileged

people payable upon graduation with a 1 % interest rate.

Although DFIs are important to the economy of Thailand since it accounts

for 71 % of the total investments, one evidence of disparity is in terms of

the regional distribution of investments. Fifty-eight percent of certificates

issued in 1988, 67% of new operations, 58% of projects numbering around

542 were located in Zone 14). Comparatively, only 21% of certificates issued,

4) The whole kingdom is divided into three zones as follows:

Zone 1: Bangkok, Samut Prakan, Samut Sakorn, Pathum Thani, Nonta Buri, Nakorn

Pathom.

Zone 2: Samut Songkhram, Ratchaburi, Kanchanaburi, Suphanburi, Angthong, Ayut

thaya, Saraburi, Nakhon Nayok, Chachoengsao, Chonburi.

Zone 3: The remaining provinces including Laem Chabang Industrial Estate.


Figure 9. Number of Projects in Zones, Thailand, 1988-1991.

600

500

400

No.of 300 Projs

200

100

o 1988 1989 1991 1991

Source: Pookaiyaudom, P., Thailand Case Study Report, UNCRD, 1993.

51

Figure 10. Foreign Investment Projects Applying for Promotional Privileges

Classified by Factory Location, Thailand, 1993-1995.

No.of Projs

400

300

200

100

o


1993 1994 1995

-Zone1 ElIZone2 DZone3

19% of new operations, 21% of all projects (193 projects) were locating in

Zone 3 (Figures 9 and 10). Four years later, still a growing number of firms

wish to locate in Zone 1, and Zone 3 only becoming a second choice. But the

decentralization of investments projects is proceeding through the years

since the number of certificates issued for Zone 3 has been increasing. In

contrast, in 1995, the choice of location for the DFIs has been between Zone

2 and Zone 3. Zone 2 has attracted 51% of the DFIs, numbering around

9,139 registered foreign firms producing electronic products, furniture, ma-

52 KEIEI TO KEIZAI

Table 4. Approved and Registered Foreign Firms by Product and Zone,

Thailand, 1995.

PRODUCT ZONE 1 ZONE 2 ZONE 3 N.A. TOTAL FROZEN SEAFOOD 0.0 0.0 37.5 0.0 37.5 CANNED FOOD 0.0 0.0 1.2 0.0 1.2 GARMENT 0.0 0.0 221. 0 0.0 221. 0 SHOES 0.0 0.0 12.0 0.0 12.0 ELECTRICAL APPLIANCE 250.0 10.0 0.0 0.0 260.0 ELECTRONIC PRODUCT 411. 4 3,487.5 462.1 0.0 4,361. 0 JEWELLY 0.0 0.0 0.0 0.0 0.0 TOY 11. 3 0.0 0.0 0.0 11. 3 FURNITURE 0.0 125.0 0.0 0.0 125.0 RUBBER GLOVES 0.0 0.0 64.0 0.0 64.0 PLATIC BAG 0.0 0.0 0.0 0.0 0.0 ARTIFICIAL FLOWER 0.0 0.0 6.8 0.0 6.8 SPINNING, WEAVING, DYEING, PRINTING, KNITTNG 0.0 78.5 503.8 0.0 582.3 MACHINERY, COMPONENT & PART 21. 2 896.9 344.4 0.0 1, 262. 5 CERAMIC & GLASS PRODUCT 0.0 47.5 62.0 0.0 109.5 ARTIFICLAL LEATHER 0.0 0.0 18.6 0.0 18.6 SPORTING EQUIPMENT 11. 3 19.6 20.0 0.0 50.9 OTHER RUBBER ORODUCT 0.0 24.5 44.6 0.0 69.1 CHEMICAL PRODUCT 0.0 16.0 2,389.1 0.0 2,045.1 OTHER PLASTIC PRODUCT 12.0 77.3 115.2 0.0 204.5 PARA WOOD PRODUCT 0.0 25.0 83.1 0.0 108.1 ANIMAL PRODUCT 0.0 0.0 32.0 0.0 32.0 AGRICULTURAL PRODUCT 0.0 0.0 37.4 0.0 37.4 PROCESSING METAL 52.7 2,813.1 2,447.0 0.0 5,312.8 LOW OR MEDIUM INCOME HOUSING 60.6 0.0 4.9 0.0 65.5 FROSEN FOOD 0.0 0.0 4.9 0.0 4.9 LARGE SCALE CULT IV ATION 0.0 0.0 2.0 0.0 2.0 MEDICAL SUPPLIES 55.9 0.0 0.0 0.0 55.9 OTHER SERVICES 29.4 0.0 35.0 0.0 64.4 SHIP BUILDING/REPAIRING/BREAKING 0.0 1.4 0.4 0.0 1.8 LOADING & UNLOADING FACILTIES, CONTAINER YARDS 0.0 0.0 0.0 0.0 0.0 WAREHOUSING, GROP DYEING, SILO 0.0 0.0 0.0 0.0 0.0 WATER TRANSPORTATION 129.6 0.0 0.0 0.0 129.6 HIGH SPEED TOUR BOAT, FERRY 0.0 0.0 0.0 0.0 0.0 R&D, POLLUTION TREATMENT 0.0 0.0 1.6 0.0 1.6 COLD STORAGE 0.0 0.0 0.0 0.0 0.0 FACILITIES SERVICE & INFRASTRUTURE 0.0 0.0 140.0 0.0 140.0 MINING & REFINING 0.0 1, 400. 0 18.5 0.0 1, 418. 5 PAPER PRODUCT 0.0 0.0 352.8 0.0 352.8 CATTLE HUSBANDRY 0.0 0.0 8.0 0.0 8.0 HOSPITAL 0.0 0.0 75.0 0.0 75.0 HOTEL 0.0 0.0 38.0 0.0 38.0 INDUSTRIAL EST ATE 0.0 116.8 60.7 0.0 177.5 OTHERS 0.0 0.0 9.8 0.0 9.8

TOTAL 1, 045. 4 9,139.1 7,653.4 0.0 17,837.9 Source: BOI, Thailand


chinery, components and parts, processing of metal and mining and refining

compared to 43% (7,653 foreign firms) in Zone 3. Similar industries that

have located in Zone 2 have also decided to put up operations in Zone 3,

notably, electrical products, machinery parts and components, chemical pro

ducts and metal processing (Table 4).

5.2. The Philippine situation

The economic and social inequalities between the urban and regions exist in

the Philippines too. As the situation in Bangkok, the National Capital region

has the highest gross regional domestic product (GRDP) so is the adjacent

Southern Tagalog (Region 4) and Central Luzon (Region 3) due to their

proximity to Metro Manila. In 1992, the per capita gross regional product of

the Metro Manila and Southern Tagalog were Pesos 25,832 (in constant

1985 prices). and Pesos12, 968 respectively. Other regions such as the Bicol

region had as low as Pesos 4,602 per capita GRDP. The poverty incidence

in six out of the 13 regions is more than 50% in 1991. In terms of regional

distribution, Region III has the highest investment (Figure 10) in the

amount of Pesos 54Billion for 1995. Although investors have high

preference for Region IV with 110 new and expansion projects totaling

Pesos 32 B. Understandably Region IV is where most of the employment is

generated as shown in Figure 11.

Looking at Table 5 carefully, foreign direct investments are very prominent

in Region IV and the National Capital Region. In the other regions, most of

the projects approved by BOI are locally owned and operated. In Region IV,

54 KEIEI TO KEIZAI

foreign companies prevail in the provinces of Cavite, Laguna and Rizal and

in the province of Zambales in Region III primarily due to the IEs in these

areas.

The Philippines being an archipelago of 7, 000 island unlike Thailand has

great disparity as far as infrastructures are concerned. Telephone density in

the Metro Manila stood at 90% in 1994 and 2% in the Bicol, Cagayan

Valley, and Eastern Visayas regions. Other telecommunications, power and

water supplies seem inadequate in the countryside that firms prefer to

establish business in the urban areas.

Table 5. Equity Investments, by Percentage, by Region, Philippines 1995.

Regions Local Equity Foreign Equity

Region 1-Ilocos Region 72 28

Region 2--Cagayan Valley 99 1

Region 3--Centra1 Luzon 57 43

Region 4-Southern Tagalog 19 81

Region 5-Bicol Region 99 1

Region 6-Western Visayas 97 3

Region 7--Central Visayas 91 9

Region 8-Eastern Visayas 91 9

Region 9-Western Mindanao 97 3

Region lo-Northern Mindanao 81 19

Region II-Southern Mindanao 95 5

Region 12-Centra1 Mindanao 100 0

Autonomous Region of Muslim Mindanao 100 0

Cordillera Admin. Region 76 26

National Capital Region 40 60

Source:BOI, Philippines.


Figure 10. BOI-Approved Projects by Region, Philippines, 1995 (Million Pesos).

III 53,768.07

IV 32,186.83

NCR 18,960.49

VI 11,152.59

VII 7,231.60

II

V

XI

X

IX

VIII

CAR

XII

I

2,601.30

2,354.86

1,445.00

1,005.49

613.76

213.10

175.67

SEVERAL LOCATIONS 1======~~~ ••••••••••• 116,883.43 NOT INDICATED] 37,494.37


Figure 11. Total Labor Generated by Region by New and Expansion

Projects, Philippines, 1996.

IV

III

NCR VII

X

XI

VI

II 750

V 602

IX 570

XII 488

VIII 318

I 172

CAR 155

SEVERAL LOCATIONS •••••••••••••••••• 25,709 NOTINDICATED .. ________________________________________ ~


56 KEIEl TO KElZAl

6. Approaches to Decentralize DFls

6. 1. Decentralization strategies in Thailand

To correct the imbalance among the regions and to remove the rural/urban

dichotomy and the prevailing disadvantages in the countryside, the govern

ment has pursued ways and means to decentralize development primarily

through an Economic Decentralization and Prosperity Distribution Policy in

1992. The main goal of this policy is to disperse the prosperity, employment

opportunities and income to the regions. To carry out this policy and ex

pedite its implementation, the National Development and Decentralization

Committee (NDDC) was established.

The BOI is in charge of the investment promotion measures to stimulate

regional investments targeting Zone 3. In light of this, the government has

initialized capital decentralization and capital mobilization in the stock

market. State financial institutions were encouraged to expand credit ser

vices to the regions at low interest, specially to the small and medium enter

prises in the Zone 3 area. Companies who operate and have their head

quarters in the regions are given the opportunity to be listed and mobilize

capital in the Thailand's stock market. The government allocates a budget

(that amounted to Baht 700 Million in 1993 and Baht 800 Million in 1994)

to develop the regional infrastructure, to provide funds to the private sector

and local authorities that may result in the government being a partner in a

joint venture, and to urge the provinces to make their own investment

plans.


The government through the Board of Investments provides incentives to

further spur decentralization. The list of activities eligible for promotion has

been expanded for projects locating way out of Bangkok under the policy

from 148 to 160. Factories relocating away from Bangkok are eligible for

BOI promotional privileges such as the following:

From Zone 1 to Zone 2

Exemption from corporate income taxes for 3 years, and for 7 years in

industrial estates or promoted industrial zones.

From Zone 1 or 2 to Zone 3

Exemption from corporate income taxes for 8 years and 50% reduction

for another 5 years after the initial exemption period

Double deduction from taxable income of water, electricity, and

transport costs for 10 years,

Twenty-five percent deduction (from net profits) of the costs of in

stallation of the project's facilities.

Among other fiscal incentives offered by the BOI according to the Zone

where the investor would locate are:

Zonel

Fifty percent reduction of import duty on machinery for projects which

export at least 80% of total sales or locate their factories in industrial

estates or promoted industrial zones

Exemption from corporate income taxes for 3 years for projects which

export at least 80% of total sales and locate their factories in industrial

58 KEIEI TO KEIZAI

estates or promoted industrial zones

Exemption from import duty on raw materials or essential materials for

1 year for projects exporting at least 30% of total sales

Zone 2

Fifty percent reduction on import duty on machinery

Exemption from corporate income taxes for 3 years extendible up to 7

years for projects which locate their factories in industrial estates or

promoted industrial zones

Exemption from import duty on raw or essential raw materials for 1

year for projects exporting at least 30% of total sales

Zone 3

Exemption from import duty on machinery

Exemption from corporate income taxes for 8 years and 59% reduction

for another 5 years after the initial exemption period.

Seventy-five percent reduction on import duty on raw and essential

materials for 5 years for domestic sales

Double deduction from taxable income of water, electricity and

transport costs for 10 years from the date of first sales

Deduction from net profit of 25% of costs of installation or construction

of the project's infrastructure facilities.

However, although all provinces are covered under this Policy, the pro

vinces eligible for all supportive measures are those in Zone 3. Likewise the

government has listed the activities included: industry, agriculture, com

munications, transportation, electricity, water, tourism and services.


Industrial estates (IEs) 5) have been established throughout the country.

The first IE, Bangchan, 39 kms. east of Bangkok opened in 1972. Since

then the Industrial Estate Authority of Thailand (lEA T) has established

more than 25 IEs and EPZs, 17 of which are in joint venture with the private

Table 6. Distribution of IEs in Thailand, 1996.

Area No. of

Area No. of

IEs IEs

Central and Western Northeastern

Region: Samut Prakan 1

Region:Nakhon Ratchasima 2

Pathum Thani I U don Ra tchathani I Samut Sakhon 1 Prachin Buri 5 Ayutthaya 4 Udon Thani I

Saraburi 4 Khon Kaen I

Ratchaburi I Northern Region: Lamphun 2 Kanchanaburi I

Chiang Rai I

Eastern Phichit I

Region:Chachoengsao 2 Chonburi 5 Southern Region: Songkhla I

Rayong 12 Total IEs 47


5) Industrial estates(lEs)have been established by many countries as a means to en

courage industrial development in the countryside and thus improve the social and

economic conditions in the region. An IE is defined by the UN as an area of land

allocated for factory buildings which is sold or leased for manufacturing purposes. The

land is developed to include roads and communication facilites and other services

necessary to meet the requirement of the industry. Financial incentives and privileges,

special qualification requirements and operational conditions and regulations are in effect

in the IEs. IEs are sometimes referred to as industrial district or industrial parks. Export

processing zones (EPZs) are special types of IE due to the type of industries that locate

there, e. g. production of goods mainly for exports (Ramos and Sazanami, 1991).

60 KEIEI TO KEIZAI

sector. Now in total there are 47 completed industrial estates (Table 6)

and 19 more under study for implementation. Map Ta Phut/Rayong area

was designated for the IE for heavy industries such as petrochemicals and

Laem Chabang/Chonburi area for IE and EPZs for light industries. The

government through the IEAT has join in partnership with Hemaraj Land

and Development Public Co. to develop the Eastern Industrial Estate

(which has already 80% occupancy and the Padding Industrial Estate

(which has already 90% occupancy) in the Rayong and Chonburi areas.

The first attempt though to decongest the Bangkok areas according to the

Fifth National Plan was the development of the Eastern Seaboard and move

economic activities to the Southeast of Bangkok. It cost the government

Baht 20 billion to put in place infrastructure in the three coastal provinces

east of Bangkok, namely, Chachongsao, Chonburi and Rayong in the early

1980s.

More recently, because of the development of the Eastern Seaboard, Rayong

has become the nation's heavy industrial zone. Siemens is jointly producing

switchboards with Telecom Asia, and Bayer, Germany will also build a

petrochemical plant in Rayong. As such it has attracted many domestic and

international banks specially after the liberalization of the financial sector.

It is projected that around 2,000 multinational companies will soon set up

business in Rayong specially in the areas of oil refineries, gas separation,

petrochemicals due to its proximity to the huge offshore natural gas

reserves in the Gulf of Thailand. Siam Cement in joint venture with Nippon

Steel and Mitsui of Japan, 10 car parts manufacturers, a Mazda/Ford

pickup assembly plant will soon establish a Baht 12 million integrated steel


mill in the Eastern IE.

The success of Rayong, a Zone 3 province has benefited much from the

measures taken by BOI to decentralize industries out of the city proper.

There are sufficient infrastructures like ports, water, electricity, telecom

munications, and highways to connect Rayong with the deep seaport of

Laem Chabang. Rayong has been developed to be able to accommodate a

big inflow of investments. In 1995, of the 1200 investments applied with the

BOI, 416 wished to locate in the eastern areas and 185 wanted to invest in

Rayong.

Each region has been allotted industries that could be promoted: North

(Chiagmai, Lamphun and Lampang) -light and clean industries such as

clothing, and high value electronics than can be airlifted, and agroin

dustries; South-heavy industries as petrochemicals; Northeast, the link to In

dochina-processing of materials and provision of services that would cater

to manufacturing and investments in Indochina.

Decentralization is thus encouraged from the above mentioned incentives

by granting maximum investment incentives to projects that will locate in

Zone 3, one of the more underdeveloped areas in Thailand. As we can see

in Figures 9 and 10, there has been an increase in the number of projects

planning to put up business in Zones 2 and 3 and that more than 50% of the

projects are applying to locate in Zone 3. For the ease of the investor, decen

tralization of authority to regional branches led to the establishment of

regional offices in Chiangmai (Northern Region), Nakhom Ratchasima

(Northeastern Region), Songkhla (Southern Region) and Chonburi (Laem

62

Chabang) .

KEIEl TO KElZAl

Most of the provincial firms in Thailand are small-scale, 70 per cent of

which employ less than 9 workers. Most of them are in food and wood base

industries. Although DFIs have increased substantially during the last

decades few local subcontracting firms had taken advantage of the oppor

tunity as shown by the rising importation of raw materials. And the govern

ment believes that in the areas of metal working, electronics parts and

transportation equipment, the Thai SMEs are capable of meeting the needs

of the DFIs. But there is lack of deepening of the industrial structure. The

Six and Seventh National Economic Plans have emphasized the role of sup

port industries. But the level of integration between the DFIs that have

been flowing into Thailand and the local firms is very low. Subcontracting is

relatively new in Thailand having been developed in the past six or seven

years. These subcontractors tend to locate close to the market or the con

tracting firms in Bangkok.

There are lack of subcontractors in the provinces who could provide high

technology products and the provinces are faced with lack of qualified en

trepreneurs. Hence the government has taken steps to strengthen the sub

contracting business in the provinces by providing technological improve

ment, management training, financial support and information support.

6.2. Decentralization framework in the Philippines

In the Philippines, development is skewed heavily in favor of the urban

areas. Cognizant of the impact of uneven growth in the regions to political


stability, appropriate government actions such as regional decentralization

to spur regional development are adopted. For one the degree of concentra

tion of DFIs and the development that accompanies it are polarized in cer

tain core urban areas. More often, urban centers could provide the in

frastructure facilities and institutions, and amenities necessary to conduct

business, either domestic or international. Against this background, the

government enacted the Local Government Code giving local officials

greater authority in running their locality. This results in keen competition

in attracting foreign investors to help the development of the regional

economy. Taking the lead in this drive are regions that have opened in

dustrial estates with facilities and amenities in place.

The Investment Priorities Plan (IPP) of 1996, the overall national plan im

plemented by the BOI to promote investments in the Philippines has the

theme, Global Competitiveness through Countrywide Industrial Dispersal.

Countryside development can likewise be enhanced if they are involved in

the global economy. Under the previous 1988 IPP, BOI started to withhold

incentives from projects locating in the Metro Manila area.

Major fiscal incentives like income tax holidays and tax and duty free impor

tation of capital equipment to induce investors to locate in the regions seem

ed effective. Investors showed preference for Region IV which in 1991 at

tracted 33 % of all projects approved. Similarly BOI believed that decen

tralizing its function with the opening of regional offices would expedite the

application and registration of firms locating in he regions. Hence 6 BOI

regional offices were established in the following locations: Legaspi (Region

V), Iloilo (Region VI), Cebu (Region VII), Cagayan de Oro (Region X) ,

64 KEIEI TO KEIZAI

Davao City (Region XI) and Baguio (Region 1).

The government has also pursued countryside development projects. The

Philippine Economic Zone Authority will soon establish 10 economic zones

(Figure 12) all over the country. These zones will also deal with infrastruc

ture development within the zones to serve the needs of industries and in

vestors. The former US military bases, Subic Bay and Clark Air Base, in

the Philippines have been converted to special economic free port zones. In

vestments in these base lands recorded US$ 1. 8 billion in 1996. Americans

were top of the 328 investors. Twelve US firms with investments worth

US$380 million located in these baselands that include prominent firms such

as Enron Subic Power Corporation, Federal Express, Coastal Subic Bay Ter

minal, Inc. One hundred eighty nine Filipino firms are situated in the

baselands with project costs of US$327 million. Coming third are the

Taiwanese firms numbering 54 with total investments of US$ 285 million.

Leading the Taiwanese group is Acer, Inc. and Universal Group of Taiwan.

Enterprises who produce for exports locate in export processing zones or in

dustrial estates. They not only enjoy priority in infrastructure development

but businesses here receive special assistance and incentives. Eleven in

dustrial estates have been authorized by far to operate as export processing

zones and several more are being developed. Enterprises earning at least 50

% of its total revenues from exports are entitled to the Board of Investment

(BOI), Export Processing Zone (EPZ) or Special Economic Zone Incen

tives including these additional privileges:

i ). Exemption from advance payment of customers duties


Figure 12. Existing Export Processing Zones, Philippines, 1996.

LIP SEPZ (Tarlac, Tarlac)

SUBIC SEPZ (Subic, Zambales)

BEPZ----"'" (Mariveles, Bataan)

TABANGAO SEPZ--~~~ (Batangas City, Batangas) .

LIDE SEPZ------(Isabel, Leyte)

MEPZ-----------~~~ (Lapu·Lapu City

)~ ...•

{]

Source: DTI, Philippines, 1996.

BCEPZ (Baguio City, Benguet)

VW SEPZ (Bo. Malaria, Caloocan City)

CEPZ (Rosario, Cavite)

FCIE SEPZ (Dasmarifias, Cavite)

GBP SEPZ (Gen. Trias, Cavite)

o·

65

66 KEIEl TO KElZAl

Figure 13. The Regional Growth Centers of the Philippines.

<:1

'_ 0

Bacnotan. La Union .... -+---Cauayan. Isabela

Baguio. Benguet ---"7::-++4

Mariveles. Bataan Rosario Cavite '--_--...;:l ..

Batangas City---'----.. ..I

~~---- Legaspi City

er~~-Tacloban City Pavia. Iloilo-~'r------+""

~-:S:o-'~~Tagoloan. Misamis Or.

J,..-e.::lf--+--t'1-- Iligan City

Parang Maguindanao---J+,f--f:i-~--'fe! ~"""'-=I--Davao City Zamboanga City

.e?' o~ 0

Source: DTI, Philippines, 1996.

Gen. Santos City

G'

Decentralization of Direct Foreign Investments: 67 The Case of the Philippines and Thailand

ii ) . Zero percent duty on imported machinery and equipment and

spare parts

iii) . Tax credit on imported raw materials for a period of five years

iv) . Tax credit for increase in current year

v) . Tax credit of 25 percent of duties on local raw materials,

capital equipment and / or spare parts for a period of 3 years extendible for

another 3 years.

The government offers fiscal and monetary incentives to enterprises

registered with the BOI (known as the Omnibus Investments Code of

1987), the EPZ. or better known as the Export Development Act. Special

packages are also provided if companies locate in special economic zones

such as the Clark, Subic and John Hay. The fiscal incentives offered to

DFIs that engage in activities as per the 1996 Investment Priority Plan

(IPP) are:

i ). Income tax holiday of 4 to 6 years

ii ). Tax and duty-free importation of capital equipment and spare

Parts

iii). Tax credit on domestic capital equipment

iv). Tax credit for taxes and duties on raw materials used in the

manufacture, processing or production for exports

Whereas the non-fiscal incentives include:

i ). Simplified customers procedures

ii ). Unrestricted use of consigned equipment

iii). Employment of foreign nationals

68 KEIEI TO KEIZAI

iv). Waiving nationality requirements for regional ASEAN or

multinational financial institutions.

Aside from the Board of Investment incentives, enterprises locating at the

EPZ will enjoy these other privileges:

i ). Exemption from local taxes (except for real estate taxes),

licenses and fees

ii ). Exemption from real estate tax on production equipment and

machineries

iii). Exemption from the 15 branch profits remittance tax

iv). 100% foreign wnership

v ). Simplified import and export procedures.

There is also the identification of regional growth areas still yet with the pur

pose to spur infrastructure development in the countryside based on the

following criteria: marketablity, strategic location, ecosystem implications,

minimun infrastructure requirement and food security. At present there are

19 listed regional growth areas in the country (Figure 13). These regional

growth centers will be developed through the implementation of the

Regional Agri-Industrial Center Program (RAICs). One RAIC will be iden

tified per region and will be given priority in terms of offsite infrastructure

development by the government while on-site development in these areas

will be private-sector led (e.g. BOT). Two or more of these growth centers

are linked to come up with the growth networks or corridors that include:

Cavite-Laguna-Batangas-Rizal-Quezon (CALABARZON) Special Develop

ment Project, Northwestern Luzon Growth Quadrangle; Panay-Negros

Growth Pole; Cagayan de Oro-Iligan Corridor; Cotabato-Davao-Zamboanga


Crescent; Zamboanga City RAIGC; and Phividec Industrial Estate Phase Ex-

pansion.

The recent industrial growth in the Philippines were however centered in

the industrial estates and EPZs from where around US$2. 6 B worth of ex

ports originated. The government owns four of these parks and IEs, and the

private sector is investing in the development of IEs. Since the working in

frastructures are already in place, IEs are favorite sites for DFI such as the

Mactan EPZ (MEPZ), Cavite EPZ, Bataan EPZ, and more recently the

Subic and Clark Ecozones.

Similar to the case of Thailand, backward linkages for DFIs specially those

located in the EPZs are very low. Many firms located in MEPZs for exam

ple import the raw materials for production. The support industries are not

capable of supplying the raw materials in the quality and quantity required

by the multinationals. Hence the firms, with the provision that if they locate

in an EPZs enjoy a duty free importation of raw materials and capital goods.

7. Concluding Note

Both Thailand and the Philippines are still favorite destinations of many

direct foreign investors specially in the manufacture of medium to high

technology products for domestic and export demand. Thailand is on to car

manufacturing, petrochemicals and electronics. In the Philippines on the

other hand, electronics and semiconductor industries are expanding. Hence

each of them are trying to beef up their locational advantages so as to at

tract future DFIs in new or expanding projects. Their locational advantage

70 KEIEI TO KEIZAI

in terms of cheap labor is already passe'. Instead they are building up their

comparative advantages in infrastructure, efficient support industries, and

more importantly, skilled and creative workforce.

The DFI led growth is well recognized and part of their national develop

ment plans is how to decentralize these investments, spread the benefits of

this growth and correct the regional imbalance. Various approaches have

been adopted to spur decentralization of DFIs from fiscal incentives to finan

cial measures as shown in the table below.

As Rueber and Guisinger indicated, tax incentives have an impact on

multinational firms whose main purpose for locating in a host country is for

exports. Tax exemptions were very strong inducements for foreign firms to

shift from Zone 1 to either Zone 2 or Zone 3 in Thailand and locate in the

Approaches / Strategies Thailand Philippines

Fiscal Incentives .; .;

Non-fiscal Incentives .; .;

Local government investment plans .; .;

Promotion of support industries, specially SMEs .; .;

Establishment of BOI regional offices .; .;

Extensive IEs .; .;

Private sector participation .; .;

Decentralized Infrastructure development .; .;

Build-Operate-Transfer scheme .; .;

Financial Promotion Measures Decentralized credit .; X

Stock mobilization .; X

Joint venture capital .; X

Investment Promotion Zones .; .;

Note: .j denotes applicable; X denotes inapplicable


EPZs in the Philippines. Tax incentives, by itself, is not sufficient. Since

these DFIs are export-oriented in nature, the decisions on where to locate

are determined in part by the adequacy and accessibility to infrastructures

like ports, airports, power, roads and telecommunications to be able to com-

petitively engage in global business. Thailand and the Philippines well

acknowledge these infrastructure bottlenecks. In this context, both the

governments of Thailand and the Philippines have given infrastructure

development a priority and are expediting their development to the extent

of involving the private sector. BOT and strategic alliances both with

domestic and foreign firms are thus being encouraged to provide the capital

and technical know-how.

It is in light of these too, that special zones, IEs/EPZs have been establish

ed throughout the nation in Thailand and the Philippines as part of the

governments' decentralization policy. The active development concept im

plies that industrial funds can be allocated in the regions where resources

can be utilized more efficiently. The eastern seaboard in Thailand houses

the heavy industries like petrochemicals because of the economic efficiency

of locating there. And the benefits derived from this can be channeled to

other areas in a passive manner e.g. income transfer.

Agglomeration in these special areas by DFIs provide economies of scale in

the construction of the vital infrastructures, specially those that would link

the firms to the global market. Since the capacity of the government is

limited the participation of the private sector is indulged to develop these

special areas. Suitable manufacturing sectors such as more income elastic

and high value added products which have higher export market potential

72 KEIEI TO KEIZAI

should be selected. This will have more far reaching impact on the local

economy if the support industries that would cater to the needs of the DFls

could be strengthened.

Thailand has been very keen to remove financial disadvantages for in

vestors deciding to locate in the provinces, and has allocated a national

budget in support of the joint venture measure, infrastructure improvement

and the formulation of the provincial investment plans. And lastly, decen

tralized planning is practiced by local governments in both case countries to

strengthen the regional investment base and promote their own localities to

foreign investors.

References:

Board of Investments, A Guide to the Board of Investments, Thailand, 1996.

Board of Investments, Invest News, Various issues, Philippines.

Boddewyn, Jean, Foreign and Domestic Divestment and Investment Decisions, Journal of

International Business Studies, December 1983.

Business Week, Time For A Reality Check in Asia, December 2, 1996.

Chen, Edward, K.Y., Foreign Direct Investments in East Asia, Asian Development Review,

Vol. 11, No.l, 1993.

Department of Trade and Industry, "The Philippines-We Mean Business", Manila, Philip

pines, 1996.

Department of Trade and Industry, Cabinet Presentation: The Regional Agri-Industrial

Growth Center Program, Malacafiang Palace, Manila, Philippines, January, 23,

1996.

Dunning, John, Trade, Location of Economic Activity and the MNE: A Search for an Eclec

tic Approach, in The International Allocation of Economic Activity, ed. Bertil Ohlin,

New York: Holmes and Meier, 1977.

Dunning, J. H., "Explaining the International Direct Investment Positions of Coun

tries:Towards a Dynamic or Development Approach", in Dunning, J.H., 1981,


1981a.

Guisinger, S. and Associates, Investment Incentives and Performance Requirement, New

York: Praeger, 1985.

Lecraw, Donald,. "Factors Influencing FDI by TNCs in Host Developing Countries: A

Preliminary Report, Multinational Enterprises in Less Developed Countries, Peter

Buckley and Jeremy Clegg Ceds.), New York: St. Martins Press, 1991.

Luce, Edwards, "Asian Tiger in Hard Training," The Financial Times, October 2, 1995.

Marasigan, Cynthia "Setting the Tone" Far Eastern Economic Review, June 13, 1996.

NEDA, "The President's 1995 Socio Economic Report", Manila, Philippines, March 1996.

NEDA, "Medium-Term Philippines Development Plan 1993-1998", NEDA, March 1994.

Office of the National Economic and Social Development Board, Economic Decentraliza-

tion and Prosperity Distribution Policy, Thailand, 1966.

Pookaiyaudom, Pornpan, Thailand Country Case Report, International Meeting on Manag

ing Industrial Transformation and Regional Development, UNCRD, Nagoya, 1993.

Ramos, Josefina and Hidehiko Sazanami, Industrial Estates and Regional Development in

Selected Asian Countries, , UNCRD, Nagoya. 1991.

Reuber, G., et.al., Private Foreign Investment in Development, Oxford:Claredon Press,

1973.

Statistical Pocketbook, Asean and Japan, Asean Centre, 1996.

The Economist, "The Philippines", May 11, 1996.

The Japan Times, APEC: Majority of APEC Members Enjoying Steady Economic

Growth", November 8, 1995.

The Japan Times, Philippine Independence Day: High Economic Growth Praised", June

12, 1996.

The Nikkei Weekly, On the Road to Sustainable Growth and Stability, June 7, 1996.

Tiglao, Rigoberto, "Boom in Progress", Far Eastern Economic Review, June 13, 1996.

Tiglao, Rigoberto, "The BOT Solution", Far Eastern Economic Review, June 13, 1996.

Umali, Celia L., Locationa1 Behavior of Firms in a Borderless Era, Keiei to Keizai,

Nagasaki University, Vol. 75, No.3.4, March 1966.

World Bank, Philippines Private Sedor Assessment", Vol. 1. July 12, 1994.

Yue, Chia Siow, Foreign Direct Investments in ASEAN Economies, Asian Development

Review, Vol. 11, No.l, 1993.

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