Bangko Sentral ng Pilipinas Governor Benjamin Diokno is optimistic the net inflow of foreign direct investments will hit the target of $9 billion this year, despite the 39-percent year-on-year drop in the first half.
Diokno said in an interview at the sidelines of the recent Euromoney's Philippine Investment Forum that while the BSP was open to the idea of revising downward the $9-billion target for 2019 because of the sluggish first-half performance, he was expecting a recovery in the second half.
"I think FDIs slowed down because of the second package [of the comprehensive tax reform program]… the uncertainty how the second package would look like and, secondly, because of the [mid-term] elections [when] usually investors were in a wait-and-see mode," he said.
"But there will be a pickup in the second half. We are optimistic that net FDI will hit maybe $8 billion or $9 billion for the year. Usually $10 billion net annually, but $8 billion to $9 billion net FDI this year is good enough," Diokno said.
The proposed Package 2 of the CTRP called Corporate Income Tax and Incentives Reform Act or CITIRA aims to improve and modernize the country’s corporate tax system by gradually reducing the corporate income tax rate from 30 percent to 20 percent and overhauling the tax incentives given to companies.
It was approved on third and final reading by the House of Representatives on Sept. 13 while a counterpart bill was being deliberated in the Senate.
The Philippines currently imposes the highest corporate income tax rate in the Association of Southeast Asian Nations.
Latest data from the BSP showed that net inflow of foreign direct investments dipped 39 percent in the first six months to $3.6 billion from $5.8 billion a year ago.
Equity placements in the six-month period came mostly from Japan, the United States, Singapore, China and South Korea. These went to financial and insurance, real estate, manufacturing, transportation and storage, administrative and support services.
Last year, net inflows of foreign direct investments fell 4.4 percent to $9.802 billion from the record $10.256 billion in 2017. The full-year number missed the official target of $10.4 billion set by the Bangko Sentral.