A LEADER of the House of Representatives said the Philippines’s 2022 foreign investment performance could be better if “foreigners are not spooked,” and offered three suggestions on how to avoid this.
House Committee on Ways and Means Chairman Joey Sarte Salceda, in a statement over the weekend, cited the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) as a key driver of foreign direct investment (FDI), which hit an all-time high in 2021.
According to Salceda, 2022 can be an even better year for foreign investors “if they are not spooked, either by our overdependence on imported oil, or by the results of the elections and its aftermath.”
To do this, Salceda said the next President must do three things immediately, “so that 2022 can be a better year for FDIs.”
“First, hire an economic team the markets can be confident with. Personnel is policy. PRRD [President Rodrigo Duterte] has not endorsed any candidate yet, so there is some policy uncertainty in terms of continuity. We are unsure whether the next President will keep good reforms intact,” he said.
“Second, the President has to act on inflation. Food and fuel prices must be priority number one for the next President. I suspect fuel prices will remain high in the first 100 days of the next administration. When inflation is high, it tends to increase the “risk premium” investors expect from a country. That makes the decision to invest in the Philippines a little more difficult for a foreign investor,” he added.
Third, Salceda said the next President must commit to property rights and institutions.
“Investors have to be certain that their property will not be confiscated and their returns will not be clawed back arbitrarily. Meaningful commitment to rule of law, fair commercial arbitration and regulation will be must-haves for the next administration,” the economist-lawmaker said.
“If we can do all that, I think 2022 will be a better year for FDI, if the next President inspires confidence, through policy and personnel preferences,” he added.
Salceda said the net FDI data for 2021, an all-time high of $10.52 billion, demonstrates that “the promise of the CREATE Law is being realized,” and that “more beneficial reforms will make 2022 a better year for investments than 2021.”
“I am elated by 2021 data, and I am hopeful that 2022 will be even better because we have not yet maximized CREATE. We still have the Strategic Investment Priorities Plan to complete. That will really guide our industrial and investment policy, and help boost high-tech and high-value sectors,” Salceda said.
“Don’t forget that 2021 was also a pandemic year, so I expect a less COVID-intense year such as 2022 to earn more FDI,” Salceda added.
“We promised record investment performance after CREATE, and it worked,” Salceda also said.
BSP’s report on FDI
Salceda cited a release from the Bangko Sentral ng Pilipinas (BSP), which noted that the December 2021 FDI report “brought the full-year 2021 FDI net inflows to a new record level of $10.5 billion, breaching the previous high of $10.3 billion in 2017.”
The 2021 level represents a 54.2-percent increase from the $6.8-billion net inflows recorded in 2020.
Salceda also noted that the increase in both debt and equity capital is similar, indicating “that foreign investors see the Philippines as something they can risk their money in, either through debt, or real skin in the game in the form of equity.”
“I attribute confidence in our credit to confidence in the capacity of both the Philippine government and the Philippine private sector to pay our debts. Confidence in our prospects, as seen in equity investments, is largely due to our commitment to economic reforms, as well as key fundamentals such as a young, talented population,” he added.