By Christine J. S. Castañeda
APPROVED foreign direct investment (FDI) commitments rose to their highest level in nearly two years last quarter even as growth slowed from the preceding three months and a year ago, according to data the Philippine Statistics Authority (PSA) released on Thursday.
The value of FDI pledges registered with the country’s seven key investment promotion agencies increased by 6.5% to P45.85 billion last quarter from the P43.05 billion in the same period last year.
The latest tally was the biggest amount since the P125.69 billion recorded in 2016’s last quarter.
Third-quarter growth, however, was slower than the second quarter’s 70.4% and the 61.2% in July-September last year.
The report counted FDIs registered with the Philippine Economic Zone Authority (PEZA), Board of Investments (BoI), 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).
The third-quarter data brought committed FDIs to P91.009 billion in the first nine months to September, 8.2% more than the P84.097 billion a year ago.
Investment pledges of Filipinos and foreign nationals totaled P259.75 billion last quarter, 5.3% less than the P274.37 billion approved the past year. Domestic investors accounted for P213.89 billion or 82.3% of the total.
If they materialize, foreign and local investments pledged in the third quarter are expected to generate 41,797 jobs across industries, 10.3% more than the 37,891 prospective jobs from investments pledged a year ago.
INTEREST STILL ‘HIGH’
“Foreign investments for 2018 were actually expected to outdo the previous year, and this higher level of total inflow was not surprising,” said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines.
“Overall, this is still due to the high interest in the Philippines as one of the investment destinations in Southeast Asia. I think that external environment threats such as the US-China trade war are largely beneficial to China’s peripheral trading partners such as the Philippines.”
Sought separately for comment, Michael L. Ricafort, economist at Rizal Commercial Banking Corp., said: “Foreign investments into the Philippines continued to grow amid improved demographics and economic fundamentals, as the country is one of the fastest-growing economies in ASEAN/Asia and the country has the 12th biggest population in the world at 106 million, thereby making the country a compelling destination for the world’s biggest global/multinational companies that seek further business growth/expansion.”
“The US-China trade has caused some shifts/increased flow of foreign direct investments from China to nearby ASEAN countries such as the Philippines to avoid higher tariffs imposed on Chinese exports to the US and on US exports to China, partly resulting in higher foreign investments into the country’s manufacturing sector.”
Foreign investment commitments are different from the actual capital inflows monitored by the central bank for balance of payments purposes. Latest Bangko Sentral ng Pilipinas data showed that net foreign direct investments grew 31% to $7.422 billion in the eight months to August from $5.665 billion in 2017’s comparable period. Net FDI inflows grew 2.6% to $1.67 billion in July-August from $1.62 billion in 2017’s comparable two months.
By industry, electricity, gas, steam and air conditioning supply got 35% of third-quarter pledges at P16.064 billion, followed by real estate activities’ 25.6% share of P11.757 billion, manufacturing’s 16.595% contribution of P7.61 billion, as well as administrative and support services’ 13.136% share of P6.024 billion.
The three months to September saw PEZA contributing bulk of foreign investment pledges at P22.45 billion or 48.968% of the total. It was followed closely by BoI with P22.42 billion (48.9%), CDC’s 0.718% share (P329.016 million), CEZA’s 0.594% (P272.424 million), BoI-ARMM’s 0.513% (P235.145 million), SBMA’s 0.256% (P117.497 million) and AFAB’s 0.047% (P21.65 million).
In terms of location, Northern Mindanao got the most FDI pledges in the third quarter of P15.45 billion or 33.699% of the total, followed by Central Luzon with P13.525 billion (29.494%), the National Capital Region with P8.336 billion (18.18%), the Cavite-Laguna-Batangas-Rizal-Quezon region (CALABARZON) just south of Metro Manila with P6.658 billion (14.52%) and the Occidental and Oriental Mindoro-Marinduque-Romblon-Palawan region (MIMAROPA) in southern Luzon with P879.873 million (1.919%).
The British Virgin Islands was the top source of committed FDIs in the third quarter with P15.507 billion (33.8%), followed by Malaysia with P10.676 billion (23.3%), the United States with P4.514 billion (9.8%), Singapore with P3.764 billion (8.2%), Japan with P1.983 billion (4.3%), the Netherlands with P1.625 billion (3.5%), Australia with P1.165 bilion (2.5%) and Taiwan with P1.105 billion (2.4%).
Looking ahead, Mr. Ricafort said: “Any continuation, at the very least, or further expansion/escalation of the US-China trade war could still result to increased shifts of some foreign investments from China to ASEAN countries such as the Philippines.”