Philippines remains attractive to FDIs – Citi

MANILA, Philippines - Despite the general slowdown in most economies in Asia, the Philippines strong economic performance continues to attract foreign direct investments (FDIs) as well as other institutions that support multinational corporations (MNCs).

In the past five years starting 2010, the country’s gross domestic product (GDP) has grown by an average 6.3 percent, and the healthiest upward trajectory in recent history.

Externally, China’s economy is slowing down and investors are looking at South East Asia for better opportunities.

Melvyn Low, Citi managing director for Treasury and Trade Solutions, as well as head of ASEAN and Singapore, added that foreign investors favor the Philippines with its consumption-driven population of 100 million, nearly half classified as working or productive ages, and internationally-oriented.

“It is already the destination of choice of US multinationals. Being consumption driven is what attracts MNCs,” Low said in a briefing yesterday.

Investors are now looking at various consumer sectors including health care, pharmaceuticals, insurance, telecommunications, airlines and transportation, and infrastructure.

Existing regulation are generally acceptable to the foreign community, although the level of efficiency and digitalization remains much to be desired.

The FDIs are used to finance construction of new facilities, especially in manufacturing, or for the expansion of existing foreign business operations in the Philippines. They are long-term and job-generating.

In 2014, the Philippines registered an all-time record of $6.2 billion in FDI inflows indicating that the country was well on the road to higher growth this year.

That was a 65.9-percent increase from the $3.7 billion net inflows in 2013.

According to the Bangko Sentral ng Pilipinas (BSP) for the month of December alone, FDI net inflows amounted to $557 million, more than five-fold the $102 million recorded in the same month in 2013.

The business process outsourcing (BPO) industry is expected to end the year with 1.2 million employees, and targeted to grow to 1.3 million jobs in 2016.

Revenue-wise, the BPO industry is forecast to raise a little over $21 billion, better than the $18.9 billion in 2014. The 2016 revenue target is pegged at $25 billion.

Low said the Philippines is ideal for the BPO industry, having a large English-speaking, educated and young population. It could well be the BPO center of the ASEAN nations.

The ASEAN region meanwhile has been the largest recipient of FDI, relative to gross domestic product (GDP), in Asia Pacific.

Between 1952 and 2012, Singapore accounts for more than half of total FDI to the whole region (52 percent). Thailand ranks the second with a 13 percent share, followed by Indonesia with 11 percent, Malaysia with 10 percent, Vietnam with eight percent and the Philippines with three percent.

The ASEAN region is also benefiting from the weakening Chinese economy, the recovering US economy and the prevailing low interest rate.

The region provides interesting demographics for MNCs.

The Citi managing director said that the ASEAN is a $2.4-trillion GDP economy, with 600 million  people of which 180 million are classified in the middle segment. It is forecast to grow to about 400 million before 2030.

Assuming the ASEAN Economic Community (AEC) comes into being, it would be the seventh largest economy in the world.