MERGERS and acquisitions (M&As) and “greenfield” foreign direct investments (FDI) in the Philippines declined in 2017, according to the Asian Development Bank (ADB).
In the Asian Economic Integration Report 2018 (AEIR), the ADB said that, while this was the trend in Asia, the Philippines was among the most affected in the region.
Data showed that investments —greenfield and M&As in the Philippines contracted 54.8 percent to $5.2 billion in 2017, from $11.6 billion in 2016. This contributed 3.2 percent to the total decline in the region.
“While standard BOP [balance of payments] data only show a modest decline in inward FDI to the region, firm-level investment activity data—which provide information on mode of entry and ultimate investment ownership—show that both mergers and acquisitions and greenfield FDI in Asia declined abruptly in 2017,” the ADB said.
The report said the country with the largest decline in greenfield investments, as well as mergers and acquisitions in Asia, was Kazakhstan, which reported an 82.5-percent decline in these investments followed by Hong Kong, China with 78.7 percent and Myanmar with 73 percent.
The country that recorded the least decline in greenfield investments and M&As in 2017 were Australia with an 18.1-percent contraction and India with 27.9 percent.
Among the Asean 5, the country with the largest decline in investments was Malaysia with a contraction of 68.9 percent, while the least decline was observed in Vietnam at 43.9 percent.
“Growing trade and investment linkages in Asia and the Pacific can be a buffer for the region against uncertainties in the global economy, the report says. However, it warns that uncertainty about trade policy could dampen the recovery in regional and global trade and damage consumer sentiment and business confidence in capital spending and investment,” the ADB said.
Asia’s intraregional trade—measured by value—rose to 57.8 percent of its total global trade in 2017, from 57.2 percent in 2016. The recovery in regional trade can be attributed to the expansion of global value chains after a slowdown since 2012. Intraregional foreign direct investment also increased slightly to $260 billion in 2017, from $254.7 billion in 2016.
The report said regional integration in Asia and the Pacific, as measured by the ADB’s Asia-Pacific Regional Cooperation and Integration Index (ARCII), increased to 0.530 in 2016 from 0.525 in 2015, with a positive impact on economic growth and poverty reduction.
The index incorporated six sub-indexes that measure trade and investment, money and finance, the regional value chain, infrastructure and connectivity, movement of people and institutional and social integration.
“Enhanced regional cooperation and coordination can help countries manage regional issues, particularly if they complement national and global actions,” said ADB Chief Economist Mr. Yasuyuki Sawada. “Multilateral development banks can help increase regional public goods by reducing knowledge and financing gaps, as well as promoting regular policy dialogue for long-term cooperation among countries.”
The report also pointed to several efforts in Asia to establish and strengthen regional public goods. The ADB said in 2014 at least 18 Asian leaders pledged to eliminate malaria by 2030, spurring countries to work together to achieve the goal to the benefit of the entire region.
ADB’s Greater Mekong Subregion Health Security Project to help control communicable diseases in the Mekong region border areas is part of such efforts. Trade facilitation programs between countries in the Central Asia Regional Economic Cooperation region have boosted intraregional trade, supporting economic growth.
The multilateral development bank is committed to achieving a prosperous, inclusive, resilient and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 67 members—48 from the region. In 2017 ADB operations totaled $32.2 billion, including $11.9 billion in cofinancing.