The Department of Finance (DOF) believes the Philippines should use the time when the global economy is posting a slower-than-expected pace of growth to improve the country’s investment environment.
In its economic bulletin, the DOF said the drop in the country’s 2018 FDI levels to $9.802 billion from the 2017 level of $10.256 billion was brought about by the volatile global economic environment during the year.
“The drop in [the] 2018 FDI is just a temporary phenomenon brought about by the uncertain world economic environment,” the DOF said. “FDI flows will recover when world conditions are better. Meanwhile, the Philippines should implement reforms for a better investment environment.”
The FDI for 2018 was lower by 4.4 percent compared to the 2017 level. In terms of its percentage to the country’s gross domestic product (GDP), the 2018 FDI was 3 percent of the GDP for the year, and 3.3 percent for 2017.
The GDP of the Philippines for 2018 settled at 6.2 percent while, for 2017, it settled at 6.7 percent.
“The FDI decline in the Philippines in 2018 mirrors the global FDI decline during the past two years. In 2017, it dropped 6.5 percent to $1.9 trillion. In the first half of 2018, it dropped by a heftier 44 percent to just $432 billion. This is due to slowdown in the world economy brought about by US-China trade war, Brexit and slowdown in worldwide growth,” the DOF added.
The DOF said that to increase investments made in the Philippines by other countries, it needs to further cut red tape, as well as ease restrictions on foreign ownership with the country having the one of the most restrictive investment regimes in Asia.
To further cut red tape, the DOF said that the TradeNet.ph platform should be fully implemented. This platform is envisioned to further facilitate the exports and imports of manufacturers, apart from other digital infrastructure.
“A World Bank study shows that foreign capital should be attracted to enhance more competition and efficiency in the economy,” the DOF said.
Equity investments for 2018 fell by 33.3 percent, which reversed the surge of 31.1 percent in 2017, registering a $2.267-billion equity investment for 2018 from $3.397 billion in 2017.
“On the one hand, the rise in inflows to the electricity in 2017 is explained by the $1.3-billion investment made by a consortium of foreign investors in Energy Development Corporation [EDC], an operator of geothermal fields. On the other hand, in 2018 San Miguel Corp. acquired Masinloc Group’s power assets for $1.9 billion,” it added.
The TradeNet platform is expected to enable the government to eliminate trade-data discrepancy.
On Monday, the Bangko Sentral ng Pilipinas (BSP) reported FDI to the Philippines fell short of the government’s projection of $10.4 billion for 2018, as fewer investors placed their bets on the long-term economic prospects of the country.