Eco­nomic team moves to stir US in­ter­est

Business World - - FRONT PAGE - E. J. C. Tubayan T. Lopez M. L.

ECO­NOMIC MAN­AGERS of Pres­i­dent Ro­drigo R. Duterte have made an in­vest­ment pitch in New York, telling Amer­i­can in­vestors to be part of the Philip­pines’ “ex­cit­ing growth story” over the long term, in state­ments that un­der­scored the Asian econ­omy’s de­sire to buoy its pal­lid for­eign di­rect in­vest­ments (FDIs).

The Philip­pines made its case to Amer­ica — its long-time ally but with whom its re­la­tions soured over hu­man rights is­sues and Mr. Duterte’s anti-drug war — on Wed­nes­day just when lat­est of­fi­cial data showed that net FDI in­flows fell by an an­nual 16.5% in the seven months to July.

Fi­nan­cial gi­ant No­mura, in a re­search note re­leased yes­ter­day, dis­pelled fears over FDI prospects say­ing that the yearto-date drop could be a blip from last year’s base ef­fects and not­ing the trend “still clearly show­ing a pickup de­spite the po­lit­i­cal tran­si­tion.”

The govern­ment’s eco­nomic brief­ing in New York was the fourth in a se­ries of in­vest­ment pitches that brought Mr. Duterte’s eco­nomic team to Sin­ga­pore, Ja­pan and China in the past two months.

It co­in­cided with the an­nual meet­ings of the World Bank and the In­ter­na­tional Mone­tary Fund in Washington, D. C. which the eco­nomic man­agers said they too will be at­tend­ing.

“For­eign in­vestors, in­clud­ing those from the United States, are very much wel­come to ex­plore in­come op­por­tu­ni­ties in our busi­ness-friendly coun­try and be part of our ex­cit­ing growth story over the medium to long term,” an Oct. 12 state­ment from the Philip­pines’ In­vestor Re­la­tions Of­fice quoted Fi­nance Sec­re­tary Car­los G. Dominguez III as say­ing.

There’s work to do for the Philip­pine govern­ment to win over US in­vestors.

Early last month, the US Cham­ber of Com­merce and the Amer­i­can cham­bers of com­merce in South­east Asia re­leased find­ings of a sur­vey it made in May-June that showed many of the 27 re­spon­dents in the Philip­pines be­lieve the cur­rent govern­ment has not been ef­fec­tive “in boost­ing busi­ness con­fi­dence and pro­mot­ing in­vest­ment in the coun­try.”

Still, the Philip­pines had the high­est pro­por­tion of re­spon­dents say­ing they ex­pect profit growth this year from 2016 at 85%, fol­lowed by Viet­nam (84%).

The sur­vey showed the Philip­pines and Malaysia ( both with 22%) trail­ing be­hind Viet­nam

(34%), Myan­mar and In­done­sia ( both with 29%), Thai­land (26%) and Cam­bo­dia (23%) as a site for ex­pan­sion out­side host coun­tries.

In his Oct. 11 speech in New York, a copy of which was given to jour­nal­ists yes­ter­day, Mr. Dominguez said that thru the govern­ment’s “Build, Build, Build” in­fra­struc­ture pro­gram, “we are seek­ing to match the in­fra in­vest­ments of our neigh­bors such as Thai­land and Viet­nam.”

That large- scale in­fra­struc­ture plan — about P8- 9 tril­lion — will be “funded by means of of­fi­cial devel­op­ment as­sis­tance pack­ages as well as by ex­panded rev­enues ex­pected from the com­pre­hen­sive tax re­form pack­age,” the Fi­nance chief said.

The House of Rep­re­sen­ta­tives and the Se­nate have yet to agree on a rec­on­ciled ver­sion of the first of a se­ries of tax re­forms, al­though the Pres­i­dent wants it im­ple­mented by Jan­uary 2018.

How much the Philip­pines needs the US now — after an­tag­o­niz­ing it ear­lier — is not clear. But the US is the Philip­pines no. 3 trade part­ner after China and Ja­pan with total trade of $1.3 bil­lion in July, ac­cord­ing to data from the Philip­pine Sta­tis­tics Author­ity. It was the sixth- big­gest source of FDI last year with $76.63 mil­lion in net in­flows (though down 83.75% from 2015), and was the fourth- largest for­eign donor be­hind the Asian Devel­op­ment Bank, the World Bank and Ja­pan, ac­cord­ing to data as of 2015 from the Na­tional Eco­nomic and Devel­op­ment Author­ity.

The two na­tions have a long his­tory of al­liance, with the Philip­pines among the very few Asian coun­tries with a mu­tual de­fense treaty with the US, but ties be­tween the two have been hurt over former pres­i­dent Barack Obama’s state­ments of con­cern over Mr. Duterte’s bloody war on drugs.

At stake also is a sec­ond grant by the US govern­ment’s Mil­len­nium Chal­lenge Corp.

Eco­nomic man­agers said the Philip­pines’s sound macroe­co­nomic fun­da­men­tals and fa­vor­able de­mo­graphic pro­file are some­thing that Amer­i­can in­vestors could find at­trac­tive.

“The cur­rent Ad­min­is­tra­tion is com­mit­ted to pur­su­ing this ag­gres­sive in­fra­struc­ture in­vest­ment pro­gram over the medium term to raise the coun­try’s com­pet­i­tive­ness and boost the econ­omy, reach­ing up to 7.3% share of GDP by 2022. In­vestors — both for­eign and lo­cal — are ex­pected to ben­e­fit from the wide-rang­ing in­come op­por­tu­ni­ties now and in the years to come,” So­cioe­co­nomic Plan­ning Sec­re­tary Ernesto M. Per­nia was quoted in the IRO state­ment as say­ing.

Mr. Duterte’s team ham­mered home the point that Amer­i­can in­vestors stand to ben­e­fit in the long term from an econ­omy grow­ing 7-8% an­nu­ally from next year to 2022, while cap­ping in­fla­tion within 2-4% till 2019.

For Bangko Sen­tral ng Pilip­inas (BSP) Deputy Gov­er­nor Diwa C. Guini­gundo: “Our healthy ex­ter­nal pay­ments po­si­tion — marked by man­age­able balance of pay­ments and am­ple for­eign ex­change re­serves — gives in­vestors com­fort about the Philip­pines’ re­silience to any ex­ter­nal risks in the fu­ture.”

“We are keen on hit­ting up­per mid­dle in­come sta­tus by 2022 and mak­ing our eco­nomic growth more eq­ui­table partly through in­fra­struc­ture devel­op­ment,” Bud­get Sec­re­tary Ben­jamin E. Dio­kno was quoted as hav­ing said.

“This, while we ex­er­cise fis­cal dis­ci­pline.”

No­mura an­a­lysts were up­beat too, not­ing the lib­er­al­iza­tion of the bank­ing sec­tor, the govern­ment’s plan to trim its neg­a­tive in­vest­ment list and the roll-out of some for­eign-funded in­fra­struc­ture projects.

“After strip­ping out this base ef­fect, we es­ti­mate total FDI in­flows are up about 65% y-o-y in H1 2017,” an­a­lyst Euben Paracuelles said in a re­port yes­ter­day.

“We are watch­ing po­lit­i­cal risks, par­tic­u­larly from a fur­ther de­cline in Pres­i­dent Duterte’s pop­u­lar­ity, as these could have im­pli­ca­tions on the ex­e­cu­tion of re­forms,” the re­port read.

“How­ever, our view of a pos­i­tive growth out­look re­mains.” — with and

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