Philippines on cusp of turning into FDI powerhouse

MANILA, Philippines -  The Philippines is on the brink of becoming a foreign direct investment (FDI) juggernaut in the Southeast Asia due to reforms being undertaken by the Duterte administration, which has partially taken away the spotlight on the President’s war on drugs from the eyes of foreign investors.

Foreign businessmen, whose confidence in the Philippines were earlier rocked by President Duterte’s controversial pronouncements, are now slowly getting back to their bullish ways in line with the government’s programs which, among others, include higher infrastructure spending, easing of economic restrictions in the Constitution, and tax reforms.

“The good news is that if the Duterte infrastructure spending increases can be combined with foreign investment opening reforms in public utilities and retail trade and reforms in agribusiness and mining sectors, the Philippines could move past Malaysia in FDI,” American Chamber of Commerce of the Philippines senior advisor John Forbes told The STAR.

The country’s net FDI last year zoomed 40 percent to a new record level of $7.9 billion, exceeding the full-year target of $6.7 billion from $5.64 billion in 2015.

“The Philippines is already surpassing Thailand in FDI inflow, a paltry $2.5 billion in 2016 as that country has encountered political and labor challenges. But Malaysia at $13.2 billion or 67 percent more (than that of the Philippines) and Vietnam at $15.8 billion or 100 percent more should remain in third and fourth place after Indonesia and Singapore,” Forbes said.

According to European Chamber of Commerce of the Philippines president Guenter Taus, the Philippines’ share to total FDI inflows in the region stood at only 4.7 percent last year despite the growth it recorded, while countries like Singapore, Indonesia and Vietnam contributed 50.7 percent, 14 percent and 9.8 percent, respectively.

Given these numbers, Taus said the Philippines’ FDI inflow levels has to grow at a much faster pace than that of its neighbors to top the league.

“Regardless, we believe that the Philippines has a lot to offer, and that it can significantly prosper especially if it consistently pursues the creation of a more competitive business environment in the following areas such as implementation of Philippine Competition Law, sanctity of contracts, tax reform, fiscal incentives regime, transparency and integrity, judicial reform, intellectual property rights protection, and partnership with local government units in increasing ease of doing business,” he said.

Trade Secretary Ramon Lopez earlier said he sees the country having a stronger position as one of the most preferred FDI destinations in the region in the next few years given the huge and relevant infrastructure spending and trade and investment reforms of the government.

The target, he said, is for the country to rank between the top three to five in the region in the next three to five years.

Businessmen from Israel were among those in the global community which consider the country as a rising force to reckon with in the region as far as investment attractiveness is concerned.

The Federation of Israeli Chambers of Commerce (FICC) recently published a special newsletter on the Philippines titled “Philippines—Your Next Investment Destination in Asia.”

The country newsletter, which was made available to FICC’s 3,000 members in Israel, provided an overview of the Philippine economy and opportunities that one of the emerging economies of the region has to offer.

 “The Philippines has come a long way from being an economic laggard in Asia to one of the fastest growing economies in the world in the last eight years. Its economy continues to show strong macroeconomic fundamentals, growing foreign direct investments, high export rates and robust domestic consumption, supported by economic reforms and good governance,” the FICC said.

Cited as reasons on why the Philippines is the best investment destination in the region include the country’s stable and resilient economic growth, good position in global competitiveness rankings, and positive investment grades from major credit-rating agencies.

Aside from these, the FCCI said the country’s location also serves as a critical entry point to over 600 million people in the ASEAN market and a natural gateway to the East-Asian economies.

The Philippines, it said, is located at the heart of ASEAN which became a fully integrated economy in 2015 and is likewise placed at the crossroads of international shipping and airlines.

“The economic development in the Philippines has many opportunities for Israeli companies in both export and import. In addition, the new administration headed by President Duterte is very interested in promoting business and economic ties with Israel,” said Ron Doron, vice president of the Chamber of Commerce Israel-Asia.