The Philippines needs to attract more foreign direct investments to achieve the gross domestic product growth target of 7 percent to 8 percent this year, DBS Bank of Singapore said Tuesday.
Latest government data showed that foreign investment pledges approved by the country’s seven investment promotion agencies fell 10.7 percent to P219 billion in 2016 from P245.2 billion a year ago. In the fourth quarter alone, foreign investment pledges declined 9.3 percent to P126 billion from P138.6 billion in 2015.
“The fall happened mainly in the second half of 2016, when approved investment pledges plunged by 18.6 percent year-on-year. A variety of reasons could be at play here. The peso has weakened since last year’s elections as the trade deficit widened while portfolio flows came under pressure,” DBS said.
The bank also said that investors probably took a more cautious approach given the change in government and the controversies surrounding the statements of President Rodrigo Duterte.
“As a percentage of GDP, the amount of FDI into the Philippines is still relatively low compared to its regional peers. This has to go up if GDP growth were to be in the 7 percent to 8 percent range in line with official targets. Admittedly, there is yet to be a significant breakthrough in policy reforms thus far in the current administration,” the bank said.
DBS said the GDP growth momentum remained very strong and it was interesting to see if sentiment would actually turn around for the better this year and that investment pledges would start to rise again.
The seven investment promotion agencies in the country are the Board of Investments, Clark Development Corp., Philippine Economic Zone Authority, Subic Bay Metropolitan Authority, Authority of the Freeport Area of Bataan, BOI-Autonomous Region of Muslim Mindanao, and Cagayan Economic Zone Authority.
Government data showed that 69 percent of the investment pledges made in the last quarter of 2016 originated from the Netherlands, Australia and the US.
The manufacturing sector accounted for the bulk of FDI pledges with P66.8 billion, followed by the electricity, gas, steam, and air conditioning supply sector with investment commitment valued at P32 billion.
Foreign investment pledges approved by the investment promotion agencies were different from actual investment inflows reported by Bangko Sentral ng Pilipinas.
The Bangko Sentral’s statistics on foreign direct investments cover actual investment inflows, which could be in the form of equity capital, reinvestment or earnings, and borrowings between affiliates.