Efforts of nations to attract foreign direct investments (FDIs) should be complemented with initiatives to strengthen the domestic economy and achieve financial stability, according to experts from the Asian Development Bank (ADB).
In an Asian Development Blog, ADB economists John Beirne, Donna Faye Bajaro, and Pilipinas F. Quising said this is ‘crucial’ since FDI inflows can be ‘volatile.’
The volatility of these inflows usually depends on global financial conditions. These can then ‘trigger boom-and-bust cycles’ that can be a challenge for economies.
‘Sound domestic fundamentals can make economies more resilient to these global shifts. Trade openness and financial development are especially important,’ the economists said.
‘Financial development is equally critical. Strong local banking systems and financial institutions help manage risk, channel funds efficiently, and maintain access to international capital markets,’ they added.
The economists said countries should institute open trade policies which can signal stability and growth potential which are attractive to attract FDIs.
They also said it is crucial for countries to have a diverse export base to reassure investors that they are making the right decision to invest ‘even during uncertain trade conditions.’
In terms of financial development, the experts said countries also need ‘robust prudential and regulatory frameworks’ which will make global lenders more confident.
Policies that promote inclusive economic growth will also be good for FDIs.
‘Even with solid fundamentals, global financial trends will continue to shape capital movements. Complementing strong macroeconomic policies with prudent financial regulations and tools to manage capital flows can help developing economies better navigate sudden changes in global liquidity and investment patterns,’ the experts said.
The latest FDI data released by the Bangko Sentral ng Pilipinas (BSP) showed FDI net inflows declined by 7.5 percent to $1.3 billion in July 2025 from $1.4 billion in July 2024.
BSP said the decrease in FDI net inflows during the month resulted from lower nonresidents’ net investments in debt instruments, which fell by 39.4 percent to $711 million from $1.2 billion.
In the January to July period this year, FDI net inflows declined by 20 percent to $4.7 billion in January-July 2025 from the $5.9 billion posted in January-July 2024.