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PHL among top FDI recipients in East Asia; still below peers

Posted on June 26, 2015

THE PHILIPPINES has emerged anew among top foreign direct investment (FDI) destinations in East Asia, beating global and regional growth rates besides, but value of inflows still paled against those of comparable Southeast Asian peers, the United Nations Conference on Trade and Development (UNCTAD) said in its World Investment Report 2015 released yesterday.

In a statement accompanying the report, UNCTAD said the Philippines climbed to 9th spot among the top 10 FDI recipients in East Asia (composed of Northeast and Southeast Asia) with $6.201-billion inflows from 10th place in 2013 with just $3.737 billion.

Global FDI inflows fell 16% annually to $1.23 trillion in 2014, dragged by the “fragility of the global economy, policy uncertainty for investors and elevated geopolitical risks.”

Philippine inflows, as tracked by the central bank, grew 65.9% to an all-time high last year, compared to East Asia’s 10% increment and Southeast Asia’s 5%.

The latest ranking, which used data from the Financial Times and UNCTAD’S FDI and Multinational Enterprises Database, showed China at the top of the heap with $128.5 billion last year from $123.9 billion in 2013.

UNCTAD’s report cited among contributors to Philippine FDI inflows last year Singapore sovereign wealth fund GIC Pte Ltd’s acquisition of an 11% stake in Emperador, Inc. -- a producer of brandy and other alcoholic beverages -- for $390 million, as well as the takeover by Angat Hydropower Corp. -- a subsidiary of Korea Water Resources Corp. -- of a hydroelectric plant in Bulacan for about $440 million.

As a fraction of Southeast Asian inflows, the Philippines grew to 4.7% of the region’s $132.867 billion last year from 3.00% of $126.087 billion in 2013.

In terms of value, however, Philippine inflows were still dwarfed by those of its comparable Southeast Asian peers:

• Singapore added 4% to $67.523 billion last year from $64.793 billion in 2013;

• Indonesia grew 20% to $22.580 bilion from $18.817 billion;

• Thailand lost 10% to $12.566 billion from $14.016 billion;

• Malaysia gave up 11% to $10.799 billion from $12.115 billion; while

• Vietnam gained 3% to $9.2 billion from $8.9 billion.

Latest available central bank data show the Philippines’ inbound FDI flows dropped by half to $851 million last quarter from $1.715 billion in 2014’s comparable three months.

“The common complaint of foreign investors is the state of infrastructure,” said Philippine Institute for Development Studies (PIDS) President Gilberto M. Llanto during the report’s launch yesterday in Makati City.

“They are also mostly concerned on the tax regime, policy uncertainty, and regulatory framework,” he added.

“What the government can do is continue the reforms.”

In the same briefing, PIDS Senior Research Fellow Erlinda M. Medalla cited the need to “relax foreign equity restrictions” in various industries. “Imagine if you are a foreign investor and you invest in a country where you have no control of your investments, why would you do that?”

Mr. Llanto added that while the country’s incentives “generally compare well” with others, one problem with the Philippines is that it has seven incentive-giving bodies. “In other countries, investors talk to only one. There is a harmonized investment regime so the rules are very efficient,” he noted.

The report, which is the 25th in the series, noted that countries’ investment policy measures last year continued “to be geared predominantly towards investment liberalization, promotion and facilitation,” with more than 80% aimed at improving “entry conditions and reduce restrictions.”

“A number of countries introduced or amended their investment laws or guidelines to grant new investment incentives or to facilitate investment procedures,” it added. “Several countries relaxed restrictions on foreign ownership limitations or opened up new business activities to foreign investment.” -- Daphne J. Magturo

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