Reforms needed to revive FDI momentum — DoF

THE PHILIPPINES could see a year-on-year recovery in foreign direct investment (FDI) if the government does more to build on the reforms which have boosted the manufacturing and financial sectors, the Finance department’s chief economist said.

“The small decline in 2015 may just be a blip considering that FDI has been rising 53.1% annually for three years, 2012 to 2014,” Department of Finance (DoF) Undersecretary and Chief Economist Gil S. Beltran said in an internal economic bulletin posted on Feb. 1.

Latest data from the Bangko Sentral ng Pilipinas show that net FDI inflows to totaled $4.987 billion from January to October last year. This falls 4.9% below the $5.247 billion recorded in the comparable 2014 period.

The economist attributed the “robust rise” in FDI inflows to the manufacturing and financial sectors to the launching of the Manufacturing Resurgence Program and the Bank Liberalization Law.

In the January- October period, manufacturing received $624.54 million or 12.5% of the total. Net inflows to the sector increased 155% from last year’s $244.93 million.

Investment channeled to financial and insurance activities, meanwhile, accounted for 10.7% of $531.83 million of total net inflows. But this trailed the $742.53 million recorded in 2014.

“These sectors will undergo further expansion in quarters ahead. Planning units in departments involved in other sectors may need to look for opportunities for reform to experience similar FDI resurgence,” Mr. Beltran said.

The construction sector witnessed the steepest rise of 1,628.19% in net FDI inflows, followed by the arts and recreation sector’s 943.8% and the education sector’s 687.5%.

Despite the sharp increases, the share of the three sectors from total net inflows remained small. Nevertheless, Mr. Beltran noted that “sectors with small FDI presence have significant growth opportunities.”

“Construction, arts and recreation services, and education are expected to enjoy more infusion due to the country’s skills endowment. This includes the [ business process outsourcing] sector which, despite low capitalization requirements, will continue to attract FDI because of cost advantages.”