In accordance to Buckley & Casson (2009) the major importance for investor may be not only the determination of direction and timing of the investment project but also local business and regulatory environment that influence the process of investment. It should be specified that the regulatory environment and governance influence play an extraordinary important role in attracting inbound investments into the countries, because they are actually one of the defining factors in the decision making regarding investing.
As it is claimed by the majority of researched literary sources, Philippines is unusual market by Asian standards, because its economy is very domestically-driven, and the population is poor in comparison to other Asian states. (Heaton, 2010) Besides, it has to be noted that Philippines have extremely high level of corruption and it influences the overall economy. (Krinks, 2002)
In order improve the situation with investment flows to Philippines, first of all, regional trade agreements have be harmonized, and professional coordination of the planning of the inbound investment into this region should be introduced. Without a doubt, development of enabling environment is another important thing to do. It includes the improvement of legal, political, social and economic environment in order to make this region a good destination for the inbound investment flow, such as: political stability and transparency, macroeconomic policies, trade policies, and other. These things of course can’t be implemented without appropriate policies and practical efforts of the national government. Macroeconomic factors (such as sound macroeconomic policies) are also vital in decision-making. Trade policies are really important as well, because they encourage investor.
Actually, it is the responsibility of the government to adopt required changes into business and investing sectors regulations, into economic conditions, and infrastructure. Clearly, local population also should be interested in such development, and improve its customer service to make the conditions for the foreign investors more easy and comfortable.
Fiscal measures that have to used to attract foreign investment include the following: reduced tax rates, tax holidays, subsidies, exemptions from import duties, accelerated depreciation allowances, investment and reinvestment allowances, specific deductions from gross earnings for national income tax purposes, deductions from social security contributions. Financial measures consist of: grants, loan and loan guarantees. And finally the following regulatory-based measures could be named: modification of the rules on worker’s rights, modification of the environmental standards, and improved protection for intellectual property rights.
Additionally, it needs to be said that investors often indicate that the lack of information about the state policy restrictions on investments is the first major barrier for them; therefore the first task of any government is to improve the transparency of the regulatory policies and provide the reliable official sources of regulatory information for the potential investors.
For example, the following special initiatives could be undertaken the government of Philippines to attract the investment flow: to design and implement policies, to create necessary institutions and to conclude the investment contracts. One of the initiatives that has to be undertaken by this country to attract investments is the signing of investment treaties, and approving the incentives (the policies that are used by national governments in order to attract internationally mobile investors), for example, any country that aims to attract investments needs to improve its regulatory frameworks and this way it may open its economy towards new investments by permission of profit repatriation and providing tax and other incentives to attract investment. Another method of investments attraction is the introduction of the investment promotion activities. (Bijit Bora, 2002)