AmCham Comment on Total 2017 net FDI in the Philippines

March 15, 2018

As long-time strong proponent of increased FDI in the Philippines, the American Chamber of Commerce of the Philippines is pleased to learn from the March 12 Bangko Sentral Pilipinas announcement that the country recorded a net inflow of US$10.05 billion in 2017.

This is great progress from 2010 when we advocated an annual FDI target of $7.5 billion after the year of 2009 when net FDI was $2.04 billion. The 2018 amount represents a 400% increase over 2009.

FDI remains very strong throughout Southeast Asia. Data taken from the BSP website for the first nine months of 2017 is shown in the table below and totaled $96 billion for the ASEAN-6 economies. (China reported $89 billion in the same period.)

With a total FDI in 2018 exceeding $10 billion, the Philippines has attained a level close to those fast-growing ASEAN economies have enjoyed for many years.

With its enormous potential, we believe the Philippines should attract even higher levels of FDI in future years. According to the BSP, 60% of the 2018 total was comprised of “intercompany borrowings.” This appears to indicate that existing investors familiar with the country are expanding operations. We expect this trend to continue so long as high GDP growth is maintained, and we hope that the 30% classified as “equity” is going into new investments.

The reforms being made by the government to reduce restrictions on foreign investment should attract new foreign investment in future years. Another reform that would support increased foreign investment would be the lifting of the 6-year old moratorium on new mining production projects to allow responsible mining activity.

However, new investment may be weakening, as indicated by recent data from PEZA and the BOI. During 2017, the manufacturing component of approved investment in PEZA decreased 46% from 2016, while the information technology component decreased 49%. The BOI reported that approved foreign investments in the fourth quarter of 2017 were only PhP22 billion, the lowest in 8 years, while domestic firm applications reached a record level. Since the PEZA and BOI data predicts future FDI inflows, this data, unless reversed, could indicate a dark cloud on the horizon.

***