Manufacturing’s rebound to attract even more foreign investors — UA&P

A STEADY REBOUND in the local manufacturing sector should attract more foreign investments to the Philippines and will in turn drive economic growth closer to the government’s goal, economists of the University of Asia & the Pacific (UA&P) said yesterday.

“Investments follow manufacturing — that’s the relationship that we see,” economist Victor A. Abola said during UA&P’s midyear economic briefing yesterday in Pasig City.

“Growth has been exceptional. Domestic demand growth here is really led by investments, contrary to the past that is consumer- led. Together with that would be manufacturing resurgence: investments normally respond to the increase in industrial output.”

Mr. Abola said Philippine gross domestic product (GDP) may still hit the state’s 6.5-7.5% growth goal this year, despite a slowdown seen from the first quarter’s disappointing 6.4% climb. He forecasts a 7-7.5% expansion for 2017.

Factory output growth eased to 5.9% in April from a year ago coming from five straight months of double-digit increases, but sustained the climb for the 22nd straight time, according to Philippine Statistics Authority data that nevertheless showed average growth speeding to 11.6% in the first four months from 9.225% in 2016’s comparable period. Manufacturing rose by 11.7% year-on-year for the entire 2016.

Moreover, the monthly survey IHS Markit conducts for Nikkei, Inc. showed the Nikkei Philippines Purchasing Managers Index picked up to 54.3 in May — the strongest performance in five months — regaining the lead in Southeast Asia which the Philippines lost to Vietnam in February.

Mr. Abola said foreign direct investments (FDIs) could hit another record high this year, as the Philippines becomes a more viable site for companies overseas, led by those from Japan, Korea and Taiwan as these firms “reduce their bets” on China amid rapid wage growth and territorial disputes.

Net FDI inflows totalled $ 1.56 billion as of end-March, jumping 16.6% from the same period in 2016. The Bangko Sentral ng Pilipinas expects full-year investments to hit $8 billion, picking up from 2016’s record $7.93 billion.

An improving outlook for global growth should also support stronger Philippine economic growth by way of a surge in goods exports, higher remittances from overseas Filipino workers, inflows from the business process outsourcing sector, and tourism receipts.

A growing industrial sector will also open up more jobs for Filipinos, which in turn will improve incomes and ease poverty.

Chandramogan Anamirtham, president and chief executive officer of Hitachi Global Storage Technologies Philippines Corp., yesterday said the country is viewed as an “equal or better” investment destination compared to its neighbors. Mr. Anamirtham said the country’s “productive and adaptable” talent pool, good work attitude, and lower labor costs offset high power costs when investors decide whether to do business here.

FDI prospects also look promising under President Rodrigo R. Duterte, given his administration’s “openness” to ease Constitutional restrictions on foreign ownership to make the country more attractive to offshore capital, said UA&P founder Bernardo M. Villegas.

Moves to relax the foreign equity cap began in the 16th Congress but did not prosper due to lukewarm reception from former Pres. Benigno S.C. Aquino III. —