"We believe the country has great potential to attract investment but significant reforms are needed to make it happen,” HSBC economist Trinh Nguyen said in a research paper.

But the economist said that with the prevailing political conditions, any such reform would not likely take place until 2016, the year President Aquino leaves office.

"As such, we believe FDI will only increase marginally in the Philippines,” she said.

In a Jan. 9 research titled "The Great Migration: How FDI is moving to Asean (Association of Southeast Asian Nations) and India,” Nguyen said China received the most FDIs in the developing world since 1993, thanks to a surplus of labor, a large market and favorable policy. But rising costs from increasing wages, an appreciating renminbi and a shrinking working population have been pushing multinationals to relocate from the mainland. As a result, countries with large pools of labor, strong domestic demand and low costs have become attractive destinations, the analyst said.

The 10-member Asean comprises Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei Darussalam, Vietnam, Lao PDR, Myanmar and Cambodia.

In the past two years, she noted, investors have been going back to Asean for the growth potential while they hope to take advantage of lower costs. Now, the Asean accounts for 7.6 percent of the world’s investment flows while that of China stands at 8.1 percent.

The report noted that Indonesia and Vietnam are keen to attract more FDIs, while the Philippines and India—which both have a large labor supply and consumer market—are "more reluctant.”

FDIs to the Philippines may have increased from a low base, HSBC said, but its "restrictive” policy and "uncompetitive” business environment have hindered its growth potential. The Philippines has the worst competitiveness ranking in the Asean, according to the World Bank.

The Philippine Constitution prescribes the 40-percent foreign ownership restriction in mass media and advertising, educational institutions, land ownership, public utilities, and the exploitation of natural resources, except as provided by law.

"But it doesn’t have to be this way, the analyst said. "Consumption is robust and growth in the working population will be the highest in the region over the next three decades.

13-14 billion USD in FDI expected in 2013

Vietnam expects to attract 13-14 billion USD in foreign direct investment (FDI) this year, according to the Ministry of Planning and Investment (MPI).

Do Nhat Hoang, head of the Foreign Investment Agency, further said at a press briefing in Hanoi on January 4 that the ministry will focus on improving the quality and effectiveness of FDI capital and how it is managed by the State.

FDI will be divided based on the demand of each sector and area as well as partners, he added.

Removing barriers for investors involved in the service industry, which Vietnam lacks, and raising those technical barriers in line with international commitments to limit inappropriate projects is another measure to increase FDI in 2013, according to Hoang.

As many as 1,100 newly licenced FDI projects and 435 additional capital projects were reported by the MPI between January 1 and December 15, 2012.

FDI capital exceeded 13 billion USD in 2012. Japan was the largest investor with 5.13 billion USD, accounting for 39.5 percent of all FDI in Vietnam.

Up to 9.1 billion USD of FDI was registered in the processing and manufacturing sector - equivalent to 70 percent of the total in 2011.

Hoang noted that additional capital from existing projects increased by 58.5 percent compared to 2011, demonstrating existing foreign investors’ trust in Vietnam’s business environment, he added.

Seventy percent of FDI projects were in production, complementing the country’s course of industrialisation and modernisation.

Last year, VIetnam invested 1.3 billion USD to projects in other countries. This year’s target is between 1-1.5 billion USD.