The country’s neighbors—Thailand, Vietnam and Bangladesh—are poised to become the major beneficiaries of the trade war between the United States and China, but the Philippines is not in the radar of investors that are intending to relocate.
While the ongoing US-China trade war may be considered one of the significant headwinds that will affect the global economy, Fitch Solutions said it is creating some “winners” in the agricultural and manufacturing sectors where supply chains are recalibrated.
Vietnam, for example, stands out as the most immediate beneficiary of multinational firms’ efforts to diversify and maintain access to US markets, Fitch Solutions said. Bangladesh was identified as one of Vietnam’s biggest competitors to the US-China trade war fallout, especially in the textile market.
Fitch Solutions also said in a statement that Thailand and Malaysia are also likely to see some increase in manufacturing investment, with companies like Daikin Industries already announcing plans to move the production of its compressors to the two countries.
Indonesia is seen to benefit from Mid-Range Value Added Manufacturing in the information and communications technology sector.
Earlier this year, some economists speculated that should the US-China trade war linger or worsen, some foreign investments may be redirected to Asean countries, such as the Philippines, to avoid higher tariffs on US imports from China. However, the Philippines seems to be getting the short end of the investment stick.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that short-term investments made by foreign investors in the local market slumped to net outflows in the first half of the year as investing sentiment paled due to trade war and domestic growth issues.
Foreign portfolio investments (FPI) in January to June recorded net outflows of $720.98 million. This is a reversal of the $322.87 million in net inflows seen in the same period last year.
ING Bank Manila economist Nicholas Mapa then said the slump in the country’s FPI performance largely emanated from the decisions made by investors anxious about the US-China trade war.
Foreign direct investments (FDI)—or the type of investment that is often more coveted, as it stays longer in the economy and creates job opportunities for locals—fared no better.
Latest data from the BSP showed a 37.1-percent annual drop in the net FDI to the country in the January-to-May period this year.
FDI inflows reached $3.1 billion in the first five months of the year, lower than the $5 billion recorded last year.
Image credits: 范振亚 Fan | Dreamstime.com
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After “a lost decade” of the independent attempts to stabilize the national economy, China was drawn into an orbit of the American policy towards the USSR and since late 1970s the favourable conditions for its economic advance were created by the USA. The Western aid to China was increased especially during the Soviet armed forces presence in Afghanistan and the Vietnamese ones in Cambodia. Now that the Soviet presence in these countries, as well as in the region, is no longer, further assistance to China’s economy makes no sense.