Philippines attracts steady stream of FDI

Courtney Fingar and Simon Curtis | December 22, 2015

Strength and variety of inward investment prepare the ground for economic expansion

As its economy has picked up steam in recent years, foreign direct investment into the Philippines has also been on the rise. The volume and variety of such investment looks set to add further impetus to growth.

According to fDi Markets, an FT data service, the number of greenfield FDI projects recorded for the Philippines and the amount of capital expenditure on such projects has increased dramatically since 2011.

Last year saw an 86 per cent increase in project numbers on 2011 figures. The number of companies investing rose by 89 per cent comparing 2014 with 2011, representing significant increases. Total capex also increased by 71 per cent.

This year looks likely to end on another FDI high note for the south-east Asian archipelago.

From January to October 2015 there were 120 projects recorded by fDi Markets — only 25 fewer than in 2014 and with some months of data collection still to be published, figures for 2015 are expected to exceed those of 2014.

As the first table shows, FDI has shown robust growth during the past five years in terms of projects and capital expenditure.

During this period, GDP growth increased from 3.7 per cent in 2011 to 6.8 per cent in 2012 and an impressive 7.2 per cent in 2013, according to the World Bank. The pace slowed slightly last year, to 6.1 per cent, although this of course was still well ahead of the global average. The World Bank has revised down its forecasts for 2015 to 5.8 per cent but predicts growth in 2016 of a healthy 6.4 per cent.

Japanese and US companies are the most active investors in the Philippines. From 2011 to October 2015, Japanese companies have invested an estimated $5.3bn in 77 projects while US companies have spent $4.9bn on almost double the number of projects as their Japanese counterparts.

Mitsubishi Corporation is the single largest investor, with the Japanese group and its offshoots making greenfield investments in a range of sectors including real estate, chemicals, industrial machinery, automotive components, consumer products, healthcare and business services.

By capex volume, the energy sector is the largest driver of inward investment — mainly due to the big-ticket nature of these projects — but the spread is fairly well diversified, which is encouraging for future development prospects.

Traditional energy sector projects have generated the most investment by value, at an estimated $3.9bn since 2011. The most prolific sector by number of projects is business services (114), due to the thriving business process outsourcing industry, followed by financial services (85).

Other top sectors receiving investment include real estate, hotels and tourism, metals and automotive components. Renewable energy is part of the equation, having attracted $1.2bn in 24 projects since 2011.

Source: www.ft.com