THE Philippines is still one of the countries with the lowest inflows of foreign direct investments (FDI) in 2018, data from the Bangko Sentral ng Pilipinas (BSP) showed.
With only about $9.8 billion in FDI net inflows in 2018, the Philippines sits at the third to the last out of 10 Asian countries that the BSP is tracking in terms of economic indicators.
FDI is the type of investment that is often more coveted, as it stays longer in the economy and creates job opportunities for locals. It is also not easily pulled out of the market unlike its shorter-term counterpart, the foreign portfolio investments.
The Philippines only outranks Malaysia and Taiwan as the worst performers in terms of FDI inflows in 2018: Malaysia with $8.57 billion, while Taiwan with about $7 billion for 2018. The rest of the Association of Southeast Asian Nations (Asean)-5 proceeded with tens of billions in FDI during the year.
Topping the list for the Asean-5 was Singapore with $81.85 billion in net inflow of FDI for the year, followed by Indonesia’s $20.17 billion and Thailand’s $12.46 billion.
Other Asian economies also did well for the year. India’s FDI hit $32 billion for the first three quarters of the year, while China’s FDI hit $150.84 billion in the January to September period last year. South Korea’s FDI was at $14.48 billion for 2018.
Even Vietnam’s net FDI inflow for the first three quarters of the year was already higher than the Philippines’ inflows for the rest of 2018, which was at $10.62 billion.
The Philippines’ 2018 FDI print is $600 million short of the government’s FDI projection for the year, which was at $10.4 billion.
Security Bank Chief Economist Robert Dan Roces told the BusinessMirror that while a global decline in FDI was at play in 2018, a lot of other factors account for the refusal of foreign investors to put their money for the long haul in the Philippines.
“First, the drop in PH FDI in 2018 reflected the decline in global FDI which was on the downturn in the past two years. This was exacerbated by slower global growth and the US-China trade war, as well as Brexit; these international headwinds serve to dampen foreign investor’s mood,” Roces said. “These events are temporary and are all exogenous.”
Locally, however, the Security Bank economist pointed out that there is still a lot to be done if the Philippines wants to up its game in terms of levelling up FDI inflows to the tune of the region’s pace.
He cited restrictive investment environment as a main hindrance to higher FDIs to the Philippines. “Thus, reforms must be able to produce an environment that’s encouraging to foreign investors,” Roces said, particularly citing better transportation infrastructure and logistics capability.
“FDI are sensitive to transport and logistics, so these are chief considerations. Obviously, traffic is a problem, port congestion is a problem—these all signal our infra and logistical incapacity to foreign investors,” the bank economist said.
Towards the end of 2018, manufacturers—through the monthly PMI survey -—voiced their concern over the port congestion in Manila, saying delays considerably worsened the delivery times.
Also, in the third quarter of last year, the BSP’s Business Expectations Survey (BES) of businesses involved in exporting activities reflected concern over the disruption in normal operations, resulting from annual plant overhauling and port congestion issues.
“This is why projects in potential growth areas such as Clark are important, for instance – an airport, you have a world-class port area in Subic, you have enough space to support the industrial complex around the area. Government must be able to develop the necessary infrastructure to decongest Manila, for example and even Cebu, to exhort more FDI,” he added.