COMMITTED foreign direct investments (FDI) in the second quarter made the biggest improvement in nearly three years, according to data the Philippine Statistics Authority (PSA) released on Thursday.
Preliminary PSA data showed committed FDI approved by the country’s seven key investment promotion agencies (IPAs) growing by 70.4% to P30.946 billion in the April-June period from P18.165 billion a year ago.
This was the biggest improvement since the 165% growth in the third quarter of 2015.
The second-quarter result brought last semester’s approved FDI commitments to P45.154 billion, 10% more than the P41.049 billion in 2017’s first half.
Combined investment pledges by Filipino and foreign nationals totaled P114.686 billion in the second quarter, halved from the P230.417 billion last year. Domestic investors accounted for P83.740 billion, accounting for 73%.
If they materialize, foreign and local investments pledged in the second quarter are expected to generate 44,526 jobs across industries, about 53.2% less than the 95,131 prospective jobs from investments pledged a year ago.
Registration of pledges with any of the seven investment promotion agencies (IPAs) — Board of Investments (BoI), Philippine Economic Zone Authority (PEZA), Clark Development Corp. (CDC), Subic Bay Metropolitan Authority (SBMA), Authority of the Freeport Area of Bataan (AFAB), BoI-Autonomous Region in Muslim Mindanao (BoI-ARMM) and Cagayan Economic Zone Authority (CEZA) — qualify the investor to tax perks and non-fiscal incentives.
The amounts registered with these agencies don’t reflect capital that actually come into the country, since the registrant may opt to postpone, if not shelve its project. Still, foreign investments approved by these IPAs serve as an indicator of what to expect in the future.
The three months to June saw PEZA contributing the most foreign investment pledges at P14.410 billion, growing 4.6% during the period from P13.780 billion a year ago. Close behind was that of BoI with P13.698 billion, up 283% from P3.577 billion.
Rounding the rest of the IPAs were CDC’s 6.5% share at P2.006 billion (up 354.8%), SBMA’s 2.1% at P657.6 million (954.1%), and CEZA’s 0.6% at P174.5 million (727%). Data from AFAB and BoI-ARMM were not available.
Foreign investment commitments are different from actual capital inflows tracked by the Bangko Sentral ng Pilipinas (BSP) for balance of payments purposes. Latest available data by the BSP showed that net FDI in peso equivalent grew 53.7% to P2.672 billion in April-May 2018 from P1.739 billion in the same two months in 2017.
By industry, the bulk of the foreign investment pledges went to manufacturing with a 41.5% share or P12.8 billion followed by construction (P7.1 billion) and administrative and support service activities (P5.4 billion).
“The manufacturing sector has been in a resurgence in the last few years. If you noticed, a huge chunk of the increase in total approved investments went to manufacturing. This is consistent with the current government’s push for infrastructure development that largely supports manufacturing activities,” said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UnionBank).
The National Capital Region got the most foreign investment pledges in the second quarter at 41.6% of the total. Investments in the region expanded to P12.879 billion or 151.4% more compared to the same period last year.
CALABARZON — the region just south of Metro Manila that consists of Cavite, Laguna, Batangas, Rizal and Quezon — was the second largest with 25.7% share of the total, while Central Luzon was at third with 13.8%.
Among sources of prospective FDI, pledges from Indonesia (P6.444 billion), Malaysia (P3.519 billion), France (P2.010 billion) and Thailand (P56.6 million) were noted to have growth rates above 1000% compared to the previous year’s levels.
Indonesia had the biggest chunk of commitments in the second quarter with a 20.8% share. It was followed by Japan’s 16.5% at P5.118 billion, up 6.6%. Pledges from the United States roughly doubled from last year to reach P4.002 billion or a 12.9% share.
Moving forward, UnionBank’s Mr. Asuncion is upbeat on foreign investments in the third quarter, saying: “With public spending increasing, the impact will be seen in the expansion of manufacturing.” — Vincent Mariel P. Galang