BSP cites drivers of stronger FDI inflows

THE PHILIPPINES’ infrastructure spending program and warmer ties with China and Russia will support stronger foreign investment inflows this year, the country’s central bank chief said, alongside robust expansion of local industries.

Bangko Sentral ng Pilipinas ( BSP) Governor Nestor A. Espenilla, Jr. said foreign direct investments (FDI) are on track to keep growing this year to reach a new record high.

As of its December review, the central bank saw FDI net inflows hitting a fresh high of $ 8.2 billion this year, up from an expected $8-billion stash in 2017 on the back of “sustained positive developments.” Improving global economic conditions are shaping up to be favorable for more businesses to place their bets here.

“FDI inflows uptick is further seen in 2018 in line with the continued fast tracking and modernization of the country’s infrastructure as well as growing interests from non- traditional investment sources such as China and Russia,” BSP Governor Nestor A. Espenilla said in an e-mail interview with BusinessWorld.

FDIs are a key source of capital for the local economy, which create more jobs for Filipinos as these fuel business expansions.

Some $ 5.839 billion in new investments entered the country as of September last year, close to matching the $ 5.85 billion in FDIs tallied in 2016’s comparable nine months.

The central bank is scheduled to release October FDI data today.

The United States, Singapore and the Netherlands were the biggest sources of foreign capital as of end- September, according to BSP data.

Cozier ties between Manila and Beijing amid President Rodrigo R. Duterte’s “pivot” to China are expected to unlock additional trade and investments between the two nations.

China has already pledged around $ 7.34 billion in soft loans and grants for the Philippines over the past two years, according to the Department of Finance.

The recovery of the manufacturing sector and the steady growth of services supported the influx of foreign capital last year, alongside the rollout of previously approved big-ticket infrastructure projects under the public-private partnership scheme, the BSP chief said.

This year, he again sees manufacturing — particularly of electronics and motor parts — as the biggest beneficiary of new investments. Other attractive industries include renewable energy and waterworks; real estate; entertainment financial and insurance activities; and wholesale and retail trade.

The Duterte administration’s “Build, Build, Build” mantra on infrastructure development would also entice more foreign businesses to place their bets here, Mr. Espenilla said.

On the central bank’s part, regulatory reforms to improve ease of doing business and deepen the local debt market are also expected to unlock more opportunities for FDIs.

“Strong economic fundamentals; young, reliable and educated workforce; as well as the government’s commitment to carry out reforms toward structural transformation and infrastructure development, should attract more investments into the country,” Mr. Espenilla said in his e-mail.