Q2 foreign investment pledges lowest in 9 quarters

Investment pledges made by foreign companies in the second quarter slumped to its lowest level in over two years, amid the global economic downturn caused by the coronavirus pandemic, according to data from the Philippine Statistics Authority (PSA).

The PSA said approved foreign investment pledges plunged 69% to P15.461 billion in the three months to June from P49.575 billion in the same period last year. This represents the amount of foreign-led projects given the go-signal by the country’s seven investment promotion agencies (IPAs).

The second-quarter result was the lowest amount since the P14.208 billion recorded in the first quarter of 2018, as well as the largest quarterly decline since the 82.8% plunge in the fourth quarter of 2017.

For the first six months of 2020, the approved foreign investment pledges reached P44.604 billion, only roughly half of the P95.560 billion during the same period a year ago.

Meanwhile, combined pledges of foreigners and Filipinos approved by IPAs totaled P575.34 billion, 5.4 times more than the year-ago P106.963 billion. Domestic pledges reached P559.879 billion in the second quarter, accounting for 97.3% of the total.

Should these commitments materialize, foreign and local investments pledged in the second quarter would generate 36,572 jobs, 21.4% higher than the projected additional employment of 30,135 a year ago.

Only six of the 17 regions recorded foreign pledges in the second quarter. Of these, the National Capital Region got 85.8% of the total or P13.262 billion. This is triple the commitments in the region in the second quarter of 2019.

CALABARZON — the region immediately south of Metro Manila consisting of Cavite, Laguna, Batangas, Rizal, and Quezon — received P1.884 billion in investment pledges or 12.2% of the total, followed by Ilocos Region’s P130.8 million (0.8% share), Davao Region’s P74 million (0.5%), Cagayan Valley’s P57.5 million (0.4%), and Central Luzon’s P51.7 million (0.3%).

Among the seven IPAs monitored by the PSA, the Philippine Economic Zone Authority contributed 65.4% of the total foreign investment pledges in the second quarter at P10.106 billion.

It was followed by the Board of Investments (BoI) at P5.258 billion; Cagayan Economic Zone Authority at P57.5 million; Subic Bay Metropolitan Authority at P25.8 million; Clark Development Corp. at P13.6 million; and the Authority of the Freeport Area of Bataan’s P45,672.

There are no approved commitments for the BoI-Bangsamoro Autonomous Region in Muslim Mindanao.

The United States was the biggest source of investment commitments during the period with P9.079 billion, nine times more than the P997.1 million in the second quarter of 2019 and accounting for 58.7% of the total. It was followed by the United Kingdom with P2.033 billion (13.2% share) and the Netherlands with P1.853 billion (12% share).

PANDEMIC’S EFFECT

“The decline in approved foreign investment pledges in the second quarter may still be due to the effects of the COVID-19 (coronavirus disease 2019) pandemic on investor sentiment and confidence on how the Philippines’ approach to managing and containing the pandemic relative to other neighboring economies,” John Paolo R. Rivera, an economist from the Asian Institute of Management, said in an e-mail.

The economist also said the surge in commitments from Filipino nationals would likely indicate “improving local sentiment on the domestic economy and optimizing opportunities on sectors that thrived during the quarantine period and will continue to thrive in the new normal.”

By sector, the administrative and support service activities made up 53.4% of the total foreign pledges in the second quarter with P8.262 billion. This was 2.6 times more than the P3.126 billion a year ago. This was followed by transportation and storage’s 25.3% share at P3.916 billion, up 4.4 times from last year’s P893.8 million. Manufacturing was third at P1.731 billion with an 11.2% share, but the amount of total pledges was 71.8% less than a year ago.

Mr. Rivera said enterprises under administrative and support services may have been operational during the lockdowns and would most likely grow in the new normal.
Asked for his outlook for the rest of the year, the economist said it would still depend on how the economy performs amid the pandemic.

“[A]s the Philippines moves on its way to ‘flattening the curve’, industries and sectors seen to survive and expand in the new normal would expect growth in [approved foreign investments,” Mr. Rivera said.

The foreign investment commitments tracked by the PSA are different from actual capital inflows tracked by the Bangko Sentral ng Pilipinas (BSP) for balance of payments purposes.

The BSP recorded $2.379-billion in January-May net inflows, down 25.6% from the past year’s $3.196 billion.