The Lagged Effects of Corruption Control, Business Environment and Economic Growth on Foreign Direct Investment in the Philippines

Abstract

Despite vast natural resources and geographic advantages in the Asia-Pacific region, foreign direct investment (FDI) in the Philippines was ranked among the lowest in the region for the past 30 years. Some challenges, including high-level public corruption, low economic development and the government’s inability to establish a good business environment, are seen to have reduced FDI. Moreover, the Philippines still remains lagging in the South East Asian region in terms of FDI despite recent developments, such as good GDP figures and the reforms put in place by President Benigno Simeon Aquino III. This may imply an interval between the reforms made and their impact on FDI. Thus, this study investigates the lagged effects of the government’s anti-corruption stance, reforms undertaken to facilitate business and economic growth on FDI in the Philippines. In the process, it draws on both qualitative and quantitative data: The latter utilises an auto-regressive distributed lagged model to find possible time intervals on the impact of variables with each other, while the former provides support through a narration of historical developments, trends and explanations rooted on theoretical foundations.