At­tract­ing in­vest­ments

The Philippine Star - - BUSINESS - MARY ANN LL. REYES

Pin­na­cle Real Es­tate Con­sult­ing Ser­vices has just re­leased its lat­est re­search on for­eign di­rect in­vest­ments (FDI) in the Philip­pines.

Ba­si­cally, the study tells us not to re­joice, be­cause the amount of di­rect eq­uity in­vest­ments in lo­cal com­pa­nies is much, much smaller.

When they say FDI, not ev­ery­thing trans­lates into new jobs. Af­ter all, some of the amount in­vested into the coun­try may be in the form of debt or rein­vest­ment of earn­ings, the lat­ter not be­ing new cap­i­tal. FDI in­flow into the coun­try reached a record high of $10.05 bil­lion in 2017, or 21 per­cent more than that in 2016, the Pin­na­cle study said. The FDI was boosted by the $1.2 bil­lion Au­gust in­flow, as well as the 16-month high $2 bil­lion recorded in Oc­to­ber. The Bangko Sen­tral ng Pilip­inas (BSP) at­trib­uted the all-time high FDI to pos­i­tive in­vestor sen­ti­ment on the Philip­pine econ­omy, it added.

The study pointed out that de­spite the as­tound­ing nom­i­nal fig­ure, the 2017 FDI in­flow was gen­er­ally slower than that of the growth recorded in 2016. It noted that July 2017 recorded the low­est monthly level since June 2016, which was caused by the de­cline in in­vest­ments in debt in­stru­ment to $136 mil­lion from $406 mil­lion in the same month the pre­vi­ous year. The de­cline was then off­set by the $1.5 bil­lion eq­uity in­vest­ment that came in dur­ing the month of Oc­to­ber, bring­ing the net FDI for the month to $1.9 bil­lion, the high­est since the recorded in­flow of $2.26 bil­lion recorded in April 2016.

The April 2016 in­flow was no­tably backed by the P37 bil­lion part­ner­ship be­tween the Bank of Tokyo-Mit­subishi UFJ and Se­cu­rity Bank Corp.

Mean­while, the Oc­to­ber 2017 boost was at­trib­uted to the amount of eq­uity in­vest­ment that poured in that month. Fur­ther, the $1.3 bil­lion deal be­tween En­ergy De­vel­op­ment Corp. and Philip­pines Re­new­able En­ergy Hold­ings Corp. (con­sor­tium of Mac­quarie In­fras­truc­ture and Real As­sets (Mira) and Ar­ran In­vest­ment Pri­vate Ltd.), as well as the $1 bil­lion ac­qui­si­tion of Bu­la­can­based Mighty Corp. by Japan To­bacco helped boost FDI in 2017, it said.

It should be noted that 60 per­cent of the FDI came from the ex­pan­sion in debt in­stru­ments (the in­ter­com­pany bor­row­ings from for­eign di­rect in­vestors by their sub­sidiaries/af­fil­i­ates in the coun­try), while eight per­cent was listed as rein­vest­ment of earn­ings. This leaves only 32 per­cent, or $3.26 bil­lion, as di­rect eq­uity in­vest­ment for lo­cal com­pa­nies, it em­pha­sized.

The study cited BSP data which showed that eq­uity from the United States, Sin­ga­pore, Kuwait, Ger­many, and Nether­lands were placed in elec­tric­ity, gas, steam and air-con­di­tion­ing sup­ply ac­tiv­i­ties; man­u­fac­tur­ing; con­struc­tion; real es­tate; as well as whole­sale and re­tail trade.

Pin­na­cle ob­served that the sud­den shift in the place­ments into these sec­tors may have well been the in­di­ca­tion that the Build Build Build pro­gram of the cur­rent ad­min­is­tra­tion is un­der­way.

It said the pro­gram would, in turn, pave the way for new op­por­tu­ni­ties for the real es­tate sec­tor and, there­fore, boost in­vestor con­fi­dence. It ex­pects the same sec­tors to be the lead­ing ben­e­fi­cia­ries of in­vest­ments in the com­ing months, to be fol­lowed by a surge in the real es­tate sec­tor.

In a pre­vi­ous study, Pin­na­cle re­minded us to take things in per­spec­tive. It quoted UNCTAD in its World In­vest­ment Re­port that while FDI growth in the Philip­pines is strong and that the coun­try has emerged as among the top FDI des­ti­na­tions in East Asia, the value of FDI in­flows still pales com­pared to its South­east Asian peers.

Much re­mains to be de­sired in terms of the coun­try’s ease of do­ing busi­ness, reg­u­la­tory re­stric­tive­ness, cor­rup­tion per­cep­tion, and other indi­ca­tors, if we re­ally want to at­tract in­vestors who cre­ate new and bet­ter jobs for Filipinos.

Ac­cord­ing to the World Bank, the Philip­pines ranks 113th in terms of ease of do­ing busi­ness. Its re­gional peers like Sin­ga­pore rank 2nd, Hongkong 5th, Malaysia 24th, Thai­land 26th, Brunei 56th, Viet­nam 68th, In­done­sia 72nd. Well, at least, we were bet­ter than Cam­bo­dia which was 135th, Lao (141st) and Myan­mar (171st).

In terms of start­ing a busi­ness, the Philip­pines was 24th, while Sin­ga­pore was 2nd, Hongkong 1st, Malaysia 12th, Thai­land 5th, Brunei 7th, Viet­nam 13th, In­done­sia 17th, Cam­bo­dia 25th, Lao 22nd, and Myan­mar 20th.

Then there is, of course, the is­sue about many busi­ness ac­tiv­i­ties in the Philip­pines ei­ther still closed to for­eign in­vest­ments or the amount of al­low­able for­eign eq­uity still low com­pared to its re­gional peers.

What­ever they say about eco­nomic co­op­er­a­tion among coun­tries does not ap­ply to for­eign in­vest­ments. Coun­tries will con­tinue to com­pete in terms of try­ing to at­tract in­vestors. We will just have to pro­vide bet­ter incentives and a more sta­ble busi­ness en­vi­ron­ment to lure in­vestors into our shores and to keep them from leav­ing.

For com­ments, e-mail at mareyes@philstar­me­dia.com

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