FDI drop a ‘temporary phenomenon’ – DOF

The drop in the country’s foreign direct investments (FDIs) in 2018 is just a “temporary phenomenon” and is expected to reverse once the global economy recovers, according to the Department of Finance (DOF).

In his latest economic bulletin, Finance Undersecretary and chief economist Gil Beltran said the country’s net FDI inflows declined to $9.8 billion in 2018 due to the slowdown in global economic growth, brought about by the US-China trade war and Brexit.

However, Beltran described the drop as a temporary occurrence that would be overturned once world economic conditions improve.

“The drop in 2018 FDI is just a temporary phenomenon brought about by the uncertain world economic environment. FDI flows will recover when world conditions are better,” Beltran said.

FDI inflows dropped by 4.4 percent to $9.8 billion in 2018 from $10.3 billion in 2017. This was also lower than the $10.4 billion target of the Bangko Sentral ng Pilipinas (BSP).

Beltran said this mirrors the decline in global FDI in the past two years. In 2017, global FDI dropped by 6.5 percent to $1.9 trillion. In the first half of 2018, it dropped further by 44 percent to $432 billion.

Nevertheless, the DOF official said the government should implement reforms in order to create a more attractive investment environment for the Philippines.

“More red tape should be drastically cut. In this regard, TradeNet.ph, among other digital infrastructure, should already be implemented. This will facilitate exports of manufactures,” Beltran said.

“Foreign ownership restrictions should be eased. The Philippines has one of the most restrictive investment regimes in Asia,” he said.

For one, the DOF’s chief economist said Commonwealth Act No. 146 or the Public Service Act should be amended to redefine public utilities, and subsequently enhance competition to bring down costs.

Recently, a report released by the World Bank noted the country’s need for more competition, particularly in the power, transport, telecommunication and professional services, to improve services and boost economic growth.