ECONOMIC MANAGERS of President Rodrigo R. Duterte have made an investment pitch in New York, telling American investors to be part of the Philippines’ “exciting growth story” over the long term, in statements that underscored the Asian economy’s desire to buoy its pallid foreign direct investments (FDIs).
The Philippines made its case to America — its long-time ally but with whom its relations soured over human rights issues and Mr. Duterte’s anti-drug war — on Wednesday just when latest official data showed that net FDI inflows fell by an annual 16.5% in the seven months to July.
Financial giant Nomura, in a research note released yesterday, dispelled fears over FDI prospects saying that the year-to-date drop could be a blip from last year’s base effects and noting the trend “still clearly showing a pickup despite the political transition.”
The government’s economic briefing in New York was the fourth in a series of investment pitches that brought Mr. Duterte’s economic team to Singapore, Japan and China in the past two months.
It coincided with the annual meetings of the World Bank and the International Monetary Fund in Washington, D.C. which the economic managers said they too will be attending.
“Foreign investors, including those from the United States, are very much welcome to explore income opportunities in our business-friendly country and be part of our exciting growth story over the medium to long term,” an Oct. 12 statement from the Philippines’ Investor Relations Office quoted Finance Secretary Carlos G. Dominguez III as saying.
There’s work to do for the Philippine government to win over US investors.
Early last month, the US Chamber of Commerce and the American chambers of commerce in Southeast Asia released findings of a survey it made in May-June that showed many of the 27 respondents in the Philippines believe the current government has not been effective “in boosting business confidence and promoting investment in the country.”
Still, the Philippines had the highest proportion of respondents saying they expect profit growth this year from 2016 at 85%, followed by Vietnam (84%).
The survey showed the Philippines and Malaysia (both with 22%) trailing behind Vietnam (34%), Myanmar and Indonesia (both with 29%), Thailand (26%) and Cambodia (23%) as a site for expansion outside host countries.
In his Oct. 11 speech in New York, a copy of which was given to journalists yesterday, Mr. Dominguez said that thru the government’s “Build, Build, Build” infrastructure program, “we are seeking to match the infra investments of our neighbors such as Thailand and Vietnam.”
That large-scale infrastructure plan — about P8-9 trillion — will be “funded by means of official development assistance packages as well as by expanded revenues expected from the comprehensive tax reform package,” the Finance chief said.
The House of Representatives and the Senate have yet to agree on a reconciled version of the first of a series of tax reforms, although the President wants it implemented by January 2018.
How much the Philippines needs the US now — after antagonizing it earlier — is not clear. But the US is the Philippines no. 3 trade partner after China and Japan with total trade of $1.3 billion in July, according to data from the Philippine Statistics Authority. It was the sixth-biggest source of FDI last year with $76.63 million in net inflows (though down 83.75% from 2015), and was the fourth-largest foreign donor behind the Asian Development Bank, the World Bank and Japan, according to data as of 2015 from the National Economic and Development Authority.
The two nations have a long history of alliance, with the Philippines among the very few Asian countries with a mutual defense treaty with the US, but ties between the two have been hurt over former president Barack Obama’s statements of concern over Mr. Duterte’s bloody war on drugs.
At stake also is a second grant by the US government’s Millennium Challenge Corp.
Economic managers said the Philippines’s sound macroeconomic fundamentals and favorable demographic profile are something that American investors could find attractive.
“The current Administration is committed to pursuing this aggressive infrastructure investment program over the medium term to raise the country’s competitiveness and boost the economy, reaching up to 7.3% share of GDP by 2022. Investors — both foreign and local — are expected to benefit from the wide-ranging income opportunities now and in the years to come,” Socioeconomic Planning Secretary Ernesto M. Pernia was quoted in the IRO statement as saying.
Mr. Duterte’s team hammered home the point that American investors stand to benefit in the long term from an economy growing 7-8% annually from next year to 2022, while capping inflation within 2-4% till 2019.
For Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo: “Our healthy external payments position — marked by manageable balance of payments and ample foreign exchange reserves — gives investors comfort about the Philippines’ resilience to any external risks in the future.”
“We are keen on hitting upper middle income status by 2022 and making our economic growth more equitable partly through infrastructure development,” Budget Secretary Benjamin E. Diokno was quoted as having said.
“This, while we exercise fiscal discipline.”
Nomura analysts were upbeat too, noting the liberalization of the banking sector, the government’s plan to trim its negative investment list and the roll-out of some foreign-funded infrastructure projects.
“After stripping out this base effect, we estimate total FDI inflows are up about 65% y-o-y in H1 2017,” analyst Euben Paracuelles said in a report yesterday.
“We are watching political risks, particularly from a further decline in President Duterte’s popularity, as these could have implications on the execution of reforms,” the report read.
“However, our view of a positive growth outlook remains.” — with E. J. C. Tubayan and M. L. T. Lopez