US, Korea in­vest­ments fal­ter in 2017

The Philippine Star - - BUSINESS - Story on B16

Amer­i­can and Korean in­vest­ments in the Philip­pines plunged in 2017 be­hind se­cu­rity and other busi­ness con­cerns, while China came roar­ing back to life due to its renewed friend­ship with the coun­try, and Ja­pan con­tin­ued to view South­east Asia’s fastest grow­ing econ­omy as a fa­vor­able in­vest­ment des­ti­na­tion. Data ob­tained by The

STAR from two of the coun­try’s largest in­vest­ment pro­mo­tion agen­cies, the Philip­pine Eco­nomic Zone Au­thor­ity (PEZA) and the Board of In­vest­ments (BOI), showed ap­proved pledges from Korea plum­meted 92.61 per­cent to P873.15 mil­lion in 2017 from P11.82 bil­lion in 2016.

Com­bined in­vest­ment pledges ap­proved by both agen­cies from Amer­i­can in­vestors also took a nose­dive last year, drop­ping 69.62 per­cent to P8.357 bil­lion from P27.51 bil­lion in 2016.

Bro­ken down per agency, PEZA-ap­proved Korean in­vest­ment pledges reached its low­est level in 14 years as it fell 84.15 per­cent to P855 mil­lion in 2017 from P5.4 bil­lion the pre­vi­ous year.

Af­ter reg­is­ter­ing P495.15 mil­lion in ap­proved pledges in 2003, Korean in­vest­ments in PEZA picked up and even reached a record-high of P13.85 bil­lion in 2015.

BOI reg­is­tered Korean in­vest­ments in 2017, mean­while, dropped 99.72 per­cent to P18.15 mil­lion from P6.42 bil­lion in 2016.

“Trade and in­vest­ment cli­mate in Philip­pines (for 2017), I am not sat­is­fied,” Korean Cham­ber of Com­merce of the Philip­pines (KCCP) pres­i­dent Ho Ik Lee told The STAR.

“Com­pared with other ASEAN coun­tries, Philip­pines still has some re­stric­tion and lim­i­ta­tion on for­eign in­vest­ment in sev­eral ar­eas. As a busi­ness­man in the Philip­pines and as pres­i­dent of KCCP, I am sorry to say that the ma­jor­ity of Korean in­vest­ment are go­ing to Viet­nam, not Philip­pines,” Lee said.

Rea­sons cited by Lee as to why Korean com­pa­nies choose Viet­nam over the Philip­pines in­clude high qual­ity of la­bor, bet­ter gov­ern­ment in­cen­tives, low tax­a­tion, low elec­tric­ity, wa­ter and telecom­mu­ni­ca­tion costs, no la­bor union, and high se­cu­rity.

US in­vestors, like­wise, headed the same di­rec­tion as their Korean coun­ter­parts did in 2017, with the value of its reg­is­tered projects in PEZA reach­ing a 13-year low.

Data showed PEZA-ap­proved in­vest­ment pledges from Amer­i­can in­vestors de­clined 69.31 per­cent to P7.74 bil­lion from P25.32 bil­lion in 2016. It is the low­est since the P5.73 bil­lion level reg­is­tered in 2003.

Amer­i­can in­vest­ments reg­is­tered with the BOI also de­te­ri­o­rated by 73.43 per­cent last year to P582.82 mil­lion from P2.19 bil­lion in 2016.

Amer­i­can Cham­ber of Com­merce of the Philip­pines senior ad­vi­sor John Forbes at­trib­uted the de­cline to many fac­tors, one of which is the short­age of new PEZA zones.

PEZA re­ported that some P72.4-bil­lion worth of eco­nomic zone de­vel­op­ment projects have re­mained un­ap­proved as of end 2017, putting on hold more in­vest­ments that await the presidenti­al procla­ma­tions of eco­zone sites be­fore start­ing con­struc­tion and op­er­a­tion.

Forbes said Amer­i­can in­vestors who are new to the Philip­pines may have also been in­flu­enced by the rhetoric of Pres­i­dent Duterte against Amer­i­cans as well those of Pres­i­dent Don­ald Trump against off­shoring.

He also cited other is­sues such as busi­ness costs, which are lower in sev­eral com­pet­ing re­gional economies, as well as re­stric­tions in ma­jor sec­tors like agribusi­ness, min­ing, and util­i­ties, and gov­ern­ment re­duc­ing or end­ing fis­cal in­cen­tives which com­pet­ing re­gional coun­tries con­tinue to of­fer.

“Traf­fic and air­port con­ges­tion in Manila and Cebu are also dis­cour­ag­ing some new and ex­pan­sion in­vest­ments,” Forbes said.

“We are hope­ful this trend will re­verse and Amer­i­can for­eign di­rect in­vest­ments will in­crease in 2018. We strongly wel­come the Duterte ad­min­is­tra­tion ini­tia­tives to re­move le­gal im­ped­i­ments to for­eign in­vest­ments which should lead to bil­lions of dol­lars of new in­vest­ment,” he added.

But while in­vest­ment pledges from the two eco­nomic pow­er­houses have sig­nif­i­cantly de­clined last year, two other eco­nomic giants are pick­ing up the slack.

The renewed ties be­tween the Philip­pines and China show fruit­ful signs as re­flected by the in­crease in the value of in­vest­ment pledges com­ing from the world’s sec­ond largest econ­omy.

Com­bined ap­proved projects from China by the PEZA and BOI grew 15 per­cent in 2017 to P1.61 bil­lion from P1.40 bil­lion in 2016.

A sig­nif­i­cant jump in par­tic­u­lar was seen in PEZA, where in­vest­ments from China surged 134.3 per­cent to P1.03 bil­lion from only P440 mil­lion the pre­vi­ous year.

The 2017 value was the sec­ond high­est amount of in­vest­ment ap­proval from China in PEZA’s his­tory, next only to the P1.16 bil­lion recorded in 2012.

The strong in­crease in PEZA ap­proval, how­ever, was dragged down by the de­cline in China in­vest­ments reg­is­tered with the BOI which stood at P575.84 mil­lion in 2017, 40.15 per­cent lower than 2016’s P962.20 mil­lion.

Re­new­ing the coun­try’s ties with China, which was frac­tured by ter­ri­to­rial dis­putes over the West Philip­pines Sea, has been a pri­or­ity of the Duterte ad­min­is­tra­tion since day one.

Mean­while, Ja­pan has re­mained a steady part­ner for the Philip­pines amid changes and ad­just­ments in the first full year of the Duterte ad­min­is­tra­tion.

Ja­panese in­vest­ment pledges in PEZA and BOI soared 23.79 per­cent to P31.48 bil­lion last year from P25.43 bil­lion in 2016.

For PEZA alone, the projects reg­is­tered were val­ued at P22.61 bil­lion, up 21.61 per­cent from P18.6 bil­lion in 2016.

Ja­panese in­vest­ments ap­proved by the BOI, mean­while, rose 29.74 per­cent to P8.87 bil­lion in 2017 from P6.83 bil­lion the pre­vi­ous year.

Ja­pan Cham­ber of Com­merce and In­dus­try of the Philip­pines pres­i­dent Hiroshi Shi­raishi ear­lier said the Philip­pines con­tin­ues to be an at­trac­tive in­vest­ment des­ti­na­tion for Ja­panese com­pa­nies, es­pe­cially the small and medium-sized ones.

Shi­raishi said var­i­ous fac­tors such as la­bor cost, easy com­mu­ni­ca­tion in the English lan­guage, com­pet­i­tive in­cen­tives, and rules of the do­mes­tic mar­ket con­tinue to draw Ja­panese in­vestors to the coun­try.

Lee

Forbes

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