INVESTOR confidence remains “solid” in the Philippines with high reinvested earnings and rising foreign investment approvals despite the decline in the country’s foreign direct investment (FDI) inflows in the first half of the year, according to Trade and Industry Secretary Alfredo E. Pascual.
“In summary, although FDI in the Philippines declined in the first semester of 2023, there remains solid foreign investor confidence in the country, as demonstrated by the high reinvested earnings and the rising foreign investment approval by BOI and other IPAs (Investment Promotion Agencies),” Pascual said.
Pascual was reacting to a report that FDI declined by 20 percent to $3.9 billion in the first half of 2023, compared to the same period last year based on Bangko Sentral ng Pilipinas (BSP) data.
The Trade chief noted—according to a statement by the Presidential Communications Office (PCO) and released by the Department of Trade and Industry (DTI) on Monday—that it is “essential” to recognize that FDI numbers reflect decisions that investors made well before the actual funds’ inflow recorded by BSP.
Pascual said global financial conditions, especially the high inflation and interest rates in the first half of 2023, contributed to this FDI decline.
“Factors such as inflation rates and investment rates substantially influence FDI decisions. Stable inflation and competitive interest rates generally attract FDI, whereas high inflation and unfavorable rates can repel foreign investors,” Pascual noted.
He explained that under the administration of President Ferdinand R. Marcos, Jr., a “representative metric” of investment performance is the foreign investment approvals by the investment promotion agencies (IPAs) attached to the DTI.
However, he noted that certain foreign investments in the Philippines are not registered with the IPAs and “they happen without going for incentives.”
“FDI in a particular year does not solely arise from recent investment leads. FDI inflows could be based on decisions made years prior and might be realized in stages over time. The gestation period, or the time from initiation to realization, varies considerably depending on factors like the project’s nature, the involved sector, and the host country’s regulatory environment,” according to him.
“For example, BPO centers, if expanding or within established spaces, might only take months. Yet, if constructing a new facility, the timeline extends. Manufacturing projects, especially if new, can take 4-5 years. Renewable energy projects have varying timelines, with large-scale projects needing several years,” the statement quoted the DTI chief as saying.
As for investment approvals by the Board of Investments (BOI), and other IPAs attached to DTI, Pascual noted a “consistent increase” since 2022.
In 2022, the BOI recorded investment approvals worth P729 billion.
As of August 2023, the BOI said it already approved P720 billion worth of investment projects.
In January, the BOI adjusted its 2023 investment approvals target for 2023 from P1 trillion to P1.5 trillion.
With this, the P720 billion worth of investment approvals recorded as of August is now equivalent to 48 percent of the revised P1.5-trillion investments target for 2023.