Investors are bullish about the Philippines
IN 2011, the economy grew by just half its 2010 rate—3.7 percent vs. 7.6 percent. That is the slowest growth rate since the feeble 1.1-percent growth in 2009— another year in the vicious global recession.
Last year’s sharp slowdown, however, failed to dampen the intrinsic dynamism and buoyant mood of investors and entrepreneurs.
Here’s the proof: In the year when economic growth was halved, investments at industrial and export zones operated by the Philippine Economic Zone Authority (PEZA) amounted to P288 billion, an increase of almost 41 percent or P83.9 billion over the P204.4- billion investments recorded in 2009. The P288 billion is the biggest amount registered with PEZA in the past 16 years. So is the nearly P84-billion jump in investmemnts. PEZA has some 250 economic zones nationwide, with 2,625 locator companies.
The 41-percent increase is also the highest-ever under PEZA Director General Lilia de Lima. Because of the huge increase in both value and volume, cumulative investments with PEZA went past the P2- trillion mark for the first time.
Now, P2 trillion at P45 to $1 is equivalent to $ 44.5 billion. Divide that by 16 years and you get $2.78-billion average annual investments by PEZA enterprises. Total direct employment at PEZA has reached 840,945.
PEZA enterprises account for 86 percent of total Philippine manufactured exports.
For his part, Trade and Industry Secretary Gregory Domingo reported that total investments approved by the country’s investment agencies actually reached P800 billion last year, including the P288 billion approved by PEZA. That amount is unprecedented. This prompted him to project that economic growth, in Gross Domestic Product (GDP) terms, could hit 7 percent this year. This figure is much higher than the 5 to 6 percent GDP growth projected by the National Economic Development Authority.
BPI director and chief economist Romy Neri also sees stronger growth this year. In an analysis, he writes:
“We see an improvement from the 3.7- percent full- year GDP growth posted in 2011. Apart from base effects, there seems to be some momentum coming from private consumption, which still grew a robust 6.7 percent annually in 4Q2011 (1.6 percent quarter-on-quarter growth, seasonally-adjusted). Peso depreciation during this period likely enhanced purchasing power of remittances, which had been growing quite robustly (by about 7 percent). Compensation of overseas workers as recorded under net primary income in the NIA finally rose by 3.6 percent after dipping annually for three consecutive quarters.
“We also anticipate some recovery in merchandise exports, as firms in the electronics and semiconductor industry have started to note an increase in orders that could bring volumes back up to 2010 levels. This translates easily to double-digit growth that, while seemingly impressive, actually comprises one- offs ( i. e., a rebound in production from supply disruptions tracing to Japan’s tsunami and nuclear crisis and massive Thai floods). Because of the country’s cost advantages, we believe that services exports, which grew by 18.5 percent in the fourth quarter last year, will likely remain strong despite threats of a clampdown on the outsourcing sector by the current US government.
“Finally, to weather another global slowdown, the government seems bent on accelerating spending this year with budget officials claiming that they have already released half of the national budget for 2012. In a recent statement, the Budget department reported that over 70 percent of the amount allotted for infrastructure and capital outlays (about P208.3 billion) has already been made available. In addition, unspent funds from 2011 estimated at about P19 billion will reportedly be utilized this year.”
Why are investors bullish about the Philippines?
De Lima offers two explanations: One, investors are bullish about the Philippines where busi- ness has been good. Two, President Benigno Aquino 3rd’s anticorruption policy of matuwid na daan (straight path) has resonance among investors, prompting them to put their money where their mouth is—in the Philippines.
And there is the third explanation: natural disasters. Japan’s natural and nuclear disasters and the flooding in Thailand prompted Japanese and other companies to expand or install new production lines in the Philippines, necessitating additional investments on their part.
Business has been so good that for 2012, de Lima projects a 12percent increase in investments, exports, and employment.
A 12-percent increase in investments is equivalent to P34.56 billion over the record P288 billion in 2011, so that total investments will hit a record P322.56 billion this year.
According to de Lima, the Philippines is the electronics manufacturing hub of Asia. Among the biggest electronics investors at PEZA are among the world’s biggest—texas Instruments, Amkor Technology, Intel Technology, Fujitsu Computer, NXP Semicon- ductors, Toshiba Information, Epson Precision, Hitachi Global Storage, TDK Fujitsu, Samsung, Rohm Electronics, Lexmark, Taiyo Yuden, Panasonic Communications, Cypress Manufacturing, Mitsumi Philippines, Hoya Glass Disk, and Nidec Philippines.
PEZA is also host to a number of call-center and business process outsourcing (BPO) companies like Convergys, JP Morgan Chase Bank, Teletech and etelecare Global, as well as automotive companies like Toyota Autoparts, Ford Motor Co., and Takata Philippines.
De Lima said that unlike in past years when investors wanted only small tracks of land like 1,000 square meters, locators this year wanted industrial land by the hundreds of hectares— 100 hectares, 200 hectares, 300 hectares, and even 500 hectares. Investors who want huge and sprawling factory spaces are serious investors.
One foreign company wants to put up a shipbuilding facility, while another wants to install a complete integrated steel mill—in Luzon.
Congratulations, Lilia de Lima.
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