THE Philippines received the fifth-most “greenfield” foreign direct investment (FDI) in the Asia-Pacific, the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) said in a report.
Greenfield investment refers to new projects, as opposed to the expansion of existing projects.
The Foreign Direct Investment Trends and Outlook in Asia and The Pacific 2019/2020 report found that the Asia Pacific for the first time became the largest source and destination for FDI globally.
In 2018, the region attracted 45% of FDI inflows worldwide, and was the source of 52% of outflows.
Greenfield investment into the Asia Pacific is expected to see sluggish growth in 2019, ESCAP said.
“A decline in investment flows in 2020 is expected if the uncertainty related to international trade continues and companies continue to consolidate their value chains.”
The report said that investment prospects for the region are subdued due to the UK’s possible exit from the European Union, the US-China trade war, protectionism, and civil unrest in Hong Kong.
Global FDI flows dropped 13% to $1.3 trillion in 2018.
FDI into the Philippines fell 26% to $6.5 billion in 2018, the largest decline in Southeast Asia.
Rizal Commercial Banking Corp. economist Michael L. Ricafort in an e-mail said that a decline in 2018 FDI was due to a sharp increase in inflation and interest rates, though he called the Philippines a still-attractive destination for FDI amid improved economic and credit fundamentals in recent years.
“Net FDI inflows into the Philippines could pick up/improve especially if both local economic growth and global economic growth improve amid relatively lower interest rates and inflation recently.”
“Any partial/phase one trade deal between the US and China… could fundamentally lead to higher FDIs worldwide.”
ING Bank N.V. Manila senior economist Nicholas Antonio T. Mapa in an e-mail said that in 2019, companies that had previously set up shop in the Philippines continue to plow back their earnings into the country.
“This shows that corporates who are here realize the growth potential of the PHL and view market conditions to be favorable enough to put in more money as opposed to remitting all their earnings back to their mother companies.”
He said that newer FDI has struggled as investors are anxious about tax reform uncertainty.
“Taxes will be lowered but would-be investors are unsure as to how quickly and by how much… the actual list of fiscal incentives, which could be beneficial to the business investment decisions of these corporates, is also not set in stone just yet,” he said.
“Thus, we see a lot of investors waiting on the sidelines before they can actually do their feasibility studies to determine if they should invest, and if they should, by how much.” — Jenina P. Ibañez