FDIs seen exceeding $10 billion if CITIRA passed

MANILA, Philippines — Foreign direct investment inflows could exceed $10 billion and revisit record highs this year once the second package of the government’s Comprehensive Tax Reform Program (CTRP) is passed.

BSP Governor Benjamin Diokno told reporters net FDI inflows may exceed initial estimates and hit over $10 billion if the Corporate Income Tax and Incentives and Rationalization Act (CITIRA) is implemented.

“Our estimate right now is around $8 billion, but that’s early in the game and once CITIRA is approved, FDIs could exceed $10 billion,” Diokno said.

The BSP has lowered the projected net FDI inflows for 2019 to $6.8 billion from the original target of $9 billion. For this year, the central bank sees net FDI inflows recovering to $8.8 billion.

The Philippines recorded an unprecedented $20.1 billion net FDI inflows in 2017 and 2018. Inflows slipped by 4.8 percent to $9.8 billion in 2018 from $10.3 billion in 2017.

Latest data from the central bank showed net FDI inflows plunged by nearly 33 percent to $5.79 billion from January to October last year compared to a year ago level of $8.61 billion, reflecting subdued investor sentiment due to the continued sluggish global economic activity as well as the uncertainty due to the delayed passage of the CITIRA.

Equity placements dropped by 45 percent to $1.32 billion during the 10-month period compared to the previous year’s $2.39 billion, while withdrawals jumped by 59 percent to  $629 million from $396 million.

The bulk of the capital infusion came from Japan, the US, Singapore, China and South Korea and flowed into financial and insurance, real estate as well as manufacturing.

Reinvestments of earnings increased by 12.5 percent to $825 million from $733 million, while net debt instruments fell by 27.3 percent to $4.27 billion from $5.88 billion.

Diokno said in his speech during the annual reception for the banking community that the Philippine economy remains in a position of strength despite the global and domestic challenges.

“2019 was a very good year. I expect 2020 to be even better. We will continue to pursue goals that will benefit the Filipino people,” he said.

The Philippines barely missed its six to 6.5 percent gross domestic product (GDP) growth last year as the expansion settled at 5.9 percent last year from 6.2 percent in 2018 primarily due to the delayed passage of the 2019 national budget.

“Well there are only a few countries that you want to invest right now. The Philippines is one,” the BSP chief said.