MANILA, Philippines - The exit of investors from China has marked the entry of the Philippines as the next big investment hub in Asia.
The foreign business community in the Philippines sees the country as the apple of the eye in the region among investors despite persistent hurdles in infrastructure, Internet access and policy instability.
“An opportunity which is not to be dismissed is the trend being seen with investors leaving China due to rising costs, increased regulation, and an economic slowdown in search of greener pastures. Although until now many investors have turned toward other countries in the region, if the Philippines plays its cards right by addressing major market access obstacles and business bottlenecks, there is major opportunity to benefit from this trend and attract a significant percentage of the investors who are leaving China,” European Chamber of Commerce of the Philippines (ECCP) president Guenter Taus told The STAR.
The Philippine Exporters Confederation Inc., for its part, said interest in relocating to the Philippines is strong, with about 20 Japanese electronics companies in China keen on moving their operations to the Philippines this year amid higher wages in China.
Aside from China losing its appeal among foreign investors, Taus said other encouraging signs that foreign direct investments (FDI) would be higher this year are the country’s stable macro-economic environment, opportunities arising from infrastructure gaps and large domestic demand, as well as the continuing growth in the information technology-business process management/knowledge and process management industry.
“Saying there has been a substantial increase in incoming FDI in the last few months of 2015, I am hopeful that this signals a strong year ahead for FDI in the Philippines,” Taus said.
For 2015, the foreign business community expects Philippine FDI to be near the $6.2 billion posted in 2014 despite a slowdown in the first half of the year.
“FDI slowed in the first half of 2015 as companies were concerned that a repeat of the port congestion crisis would harm the efficiency of their logistics chains. With its growing economy and middle class and improved governance, the Philippines has finally attracted the attention of foreign investors,” American Chamber of Commerce of the Philippines Inc. senior advisor John Forbes told The STAR.
Forbes said he sees strong potential for much higher levels of FDI flowing into the country that is similar to over $10 billion annually which the other Asean-6 economies have been receiving.
“Foreign investors are focusing on long-term economic trends in the country and not as much on who the next president will be, although sustainability of the recent reforms and the quality of leadership of the next president will be factors that enter into investment decisions,” Forbes said.
Forbes is encouraging the next administration to immediately consult with the business community and develop and implement a plan to make the country as attractive as possible to investors “since investors have the greatest resources to create jobs and make growth more inclusive.”
But despite the bullish investor sentiment for the Philippines this year, the foreign business community said the country needs to address several issues to translate such optimism into actual investments.
“The FDI climate in the Philippines is still burdened by policy instability, contractual uncertainty, unexpected Commission on Audit decisions, unfulfilled tax refund commitments of the government, restrictions on foreign ownership, outdated, inefficient transportation infrastructure, high electricity costs, and excessive paid holidays and other uncompetitive labor policies,” Forbes said.
“In terms of the domestic factors, the Philippines remains one of the most restrictive markets in Asean for foreign investment, with substantial red tape for those who do not locate in PEZA zones. All these remain serious considerations against investing in the Philippines, especially when at the same time other countries in the region are investing heavily, both politically and financially, in these areas,” Taus said.