Weak FDI pledges worry Amcham

Malaya Business Insight | March 16, 2018

The Philippines is now slowly catching up with its fast growing Asean neighbors in terms of foreign direct investments (FDIs) but American businesses believe the Philippines should be able to attract even higher levels of FDI in the future.

The US businesses expressed concern that new foreign investments may be weakening, as indicated by recent data from the Philippine Economic Zone Authority (PEZA) and the Board of Investments (BOI) and that it this is not reversed, “could indicate a dark cloud on the horizon.

In a comment on the recently-released Bangko Sentral Pilipinas (BSP) data which showed FDIs in 2017 hit a record of $10.5 billion, the American Chamber of Commerce of the Philippines (Amcham) said “the Philippines has attained a level close to those fast-growing Asean economies have enjoyed for many years.”

The group said last year’s figure is great progress from 2010 when it 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 percent increase over 2009.

According to the BSP, 60 percent of the 2018 total was comprised of “intercompany borrowings.”

Amcham said 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 percent classified as “equity” is going into new investments,” it said.

Amcham noted 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 six-year old moratorium on new mining production projects to allow responsible mining activity.

In expressing concern over the weakening of new investments, Amcham said in 2017, the manufacturing component of approved investment in PEZA decreased 46 percent from 2016, while the information technology component decreased 49 percent.

The BOI reported that approved foreign investments in the fourth quarter of 2017 were only P22 billion, the lowest in 8 years, while domestic firm applications reached a record level.

PEZA and BOI data predicts future FDI inflows.

Source: http://www.malaya.com.ph/business-news/business/weak-fdi-pledges-worry-amcham