Foreign direct investments (FDIs) that flowed into the Philippines last year declined by more than 24 percent and figures are seen to worsen this year with the coronavirus pandemic hurting Asia’s supply chains.
According to the World Investment Report 2020, FDIs applied to the Philippines last year went down by 24.32 percent to $4.99 billion, from $6.6 billion in 2018. It was the second consecutive year FDI figures stumbled double digits, putting the country in a catchup position with its rivals in Southeast Asia.
When pitted against its neighbors in the region, the Philippines obtained the fifth highest FDIs for 2019, trailing Singapore, Indonesia, Vietnam and Malaysia.
The report showed Singapore secured $92.08 billion, Indonesia $23.42 billion, Vietnam $16.12 billion and Malaysia $7.65 billion. Next to the Philippines is Thailand with $4.14 billion, while Cambodia, Myanmar, Lao PDR and Brunei Darussalam got the lowest FDIs, in that order.
The United Nations Conference on Trade and Development (Unctad) projected the worst is yet to come for developing economies in Asia, including the Philippines.
In a statement, Unctad Director of Investment and Enterprises James Zhan said the lockdowns put in place across Asia to curb the spread of Covid-19 slowed down the continent’s factory output. This is expected to bring down FDIs to Asian developing nations by up to 45 percent this year.
In terms of figures, greenfield investments in Asia in the first quarter declined 37 percent, while the number of mergers and acquisitions as of April decreased 35 percent.
“Lockdown measures and factory stoppages impacted supply chain and factories’ production in the region. Failing corporate earnings, a slump in global and regional demand and economic slowdown have led multinational enterprises to postpone investment plans,” Zhan explained.
The pandemic is seen to contract reinvested earnings of foreign firms in Asia, thereby affecting new projects and expansion plans.
Further, the Unctad reported the health crisis exposed the vulnerability of Asian supply chains that are apparently dependent on the production volume of China, where the novel strain of the virus was first detected. Overall, a global recession, which is anticipated to occur, will weigh on FDI inflows to and outflows from Asia.
Image credits: Nonie Reyes
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