Q4 boosts approved 2018 FDI pledges
THE GOVERNMENT approved more foreign direct investment (FDI) commitments in the country last year, fueled mostly by pledges in 2018’s last three months.
Approved commitments for 2018 grew 69.2% to P178.97 billion from P105.75 billion in 2017, which saw a 51.7% drop from 2016’s level.
Many of the commitments were approved in the fourth quarter: P91.17 billion, 321.2% more than the P21.65 billion seen in 2017’s comparable three months.
This was the biggest amount since the P125.69 billion recorded in the fourth quarter of 2016.
“The sharp increase in the value of foreign investment pledges may have to do with easing trend in inflation and interest rates that reduce borrowing costs of new investments,” said Michael L. Ricafort, economist at Rizal Commercial Banking Corp. (RCBC).
Last year saw inflation pick up for nine straight months, peaking at a nine-year-high 6.7% in September and October before easing to six percent in November and 5.1% in December. This brought the full-year 2018 average to 5.2% against the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range for 2018 and was the fastest since 2008’s 8.2%.
“Long-term interest rates have already eased by about two percentage points from the decade highs posted on Oct. 22,
2018, thereby encouraging more foreign investments with much lower borrowing financing costs, especially big-ticket/capitalintensive foreign investments that are financed by loans,” Mr. Ricafort said.
For Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc. (UnionBank), the increase in investment pledges last quarter was a “good sign,” saying: “It somehow validates the economic growth story of the Philippines and that, in spite of the challenges of 2018, both internal and external, investors have signified their interest in the country.”
“However, it must be noted that these are pledges and may not become actual investments.”
Last year saw pledges from China grow more than 20 times to P50.69 billion from P2.33 billion in 2017. Chinese investments accounted for 28.3% of total pledges, followed by 11.8% from Singapore and 11% from Japan.
The government counts investment pledges from seven investment promotion agencies that include free port zones in Bataan, Clark, Cagayan, Subic, the Autonomous Region of Muslim Mindanao, as well as the Philippine Economic Zone Authority and the Board of Investments (BoI).
BoI contributed 58.1% of total FDI pledges last year at P103.97 billion, nearly five times the yearago P21.74 billion.
Foreign direct investment commitments are different from actual capital inflows tracked by the Bangko Sentral ng Pilipinas (BSP) for balance of payments purposes.
Latest available BSP data showed FDI net inflows actually dropping 3.2% year-on-year to $9.06 billion in the 11 months to November, casting doubt on the central bank’s expectation of a fresh FDI banner year with a projected $10.4 billion.