The political economy of foreign direct investment—Evidence from the Philippines

Abstract

Much of the conventional wisdom about the political economy of foreign direct investment suggests that many developing country governments lower regulatory and/or legislative standards in order to woo potential investors. Using the case of the tobacco industry's efforts to influence excise tax policy reforms in the Philippines, we find a much more complex reality. Over a period of more than 15 years of concerted efforts and significant financial investment, a large multinational tobacco firm was consistently unable to realize its tax policy goals with serious, negative implications for the firm. In the most recent major policy confrontation over excise tax reform that led to one of the largest tax increases on tobacco products ever in a developing country, a number of major variables mitigated the powerful firm's influence. These variables included strong support for tax reform from a number of influential political actors and a well-organized civil society movement, which led to broader public support for both public health and fiscal reasons. Global governance around economic policy and the effects of domestic institutional structures also had marked effects on the outcomes.

Investment incentives and the implementation of the Framework Convention on Tobacco Control: evidence from Zambia

“…It is recognized that the political economic context must be confronted and engaged with by tobacco control proponents for any lasting success in tobacco control policy to be made. (2,38–40)…”

Exposing and addressing tobacco industry conduct in low-income and middle-income countries

“…Though the country has long endured a reputation for poor governance and corruption 195,196 , governments can change. In this case, there was strong overt support for the reform from the highest political levels, including the President, the finance minister, the commissioner of the revenue authority and the leaders in both houses of the national legislature 197,198 More importantly for countries seeking to replicate this success, the government successfully linked the reform strongly to health, both in terms of mitigating tobacco use but also by earmarking hypothecating the vast proportion of new revenues to providing universal health coverage to the country’s most vulnerable populations. These linkages engendered widespread legislative and public support, which ensured the reform’s success.…”

Health Taxes on Tobacco, Alcohol, Food and Drinks in Low- and Middle-Income Countries: A Scoping Review of Policy Content, Actors, Process and Context

“…15,[42][43][44][45][46][47][48][49][50][51][52] Papers identified varied applications of dedicated revenue including additional nonspecific budgetary allocations to health 51 ; the development of health promotion funds or foundations 15,43,47,[50][51][52] ; subsidies for healthier alternatives 15,50 ; tagged funding for organisational units 45,49 ; and equity-based measures dedicating funds to universal health coverage or reparations for affected farmers and communities. [42][43][44]46,48 While linked to diverse goals, earmarked funds can garner public and political support for fiscal measures by acting as a traceable policy output; overcoming a common retort that measures purely focus on revenue generation. 44,47,53 In contrast however, a number of papers also identified earmarking to circumvent general public financial management; fuelling inter-ministerial conflicts and stalling or mitigating fiscal measures.…”

“…55,59,[65][66][67][68] Tiered taxations are promoted by a growing body of literature, including Baker et al 53 and Roubal 55 in relation to sweetened drinks, as a means of incentivising product reformulation. 46,48,51 However, other sources suggest that tiered structures associated with some commodities can reflect industry involvement in weakening measures; ensuring that they are geared towards competitors or smaller fragments of the market. 46,63,66 This has been the case with tobacco in Indonesia, where tiered measures have embedded conditions favourable to industry.…”

“…46,48,51 However, other sources suggest that tiered structures associated with some commodities can reflect industry involvement in weakening measures; ensuring that they are geared towards competitors or smaller fragments of the market. 46,63,66 This has been the case with tobacco in Indonesia, where tiered measures have embedded conditions favourable to industry. [65][66][67][68] As alluded to by Williams 64 and Kaiser et al, 48 if insufficiently monitored, tiered measures may also complicate administration and risk diminishing the health impact of fiscal measures.…”