“The key to attracting more foreign investments in the years ahead is to create a business-friendly environment that promotes growth, innovation, and sustainability”
THE good news on the economic front is the Marcos Jr. administration is making good progress in attracting more foreign direct investments to our shores.
Long-term capital flows into the Philippines surged by more than a fifth in March, growing for the third consecutive month this year as investments from foreign companies in debt instruments swelled and drove the increase.
Data recently released by the Bangko Sentral ng Pilipinas showed net FDIs grew 23.1 percent to $686 million from $557 million in March 2023.
The March portfolio brought the cumulative FDI net inflows to $3 billion during the first quarter of the year, marking a 42-percent growth from the $2.1 billion recorded in the same period in 2023.
The BSP attributed the FDI increase to the country’s strong growth prospects and efforts to moderate inflation.
Chief Economist Michael Ricafort of Rizal Commercial Banking Corporation has pointed to improved economic and financial markets performance in recent months for the country’s economic growth, which he said is among the fastest in the ASEAN region.
He also cited favorable demographics and lower long-term interest rates and borrowing costs that helped boost investments globally.
The positive outlook for the domestic economy in the coming years is shared by HSBC Global Research, which said the country is likely to attract FDIs amid reforms that improved the country’s business climate.
“Thanks to the country’s robust reform narrative, FDI sentiment in the Philippines is bound to improve in the years ahead and the general pessimism regarding the country’s FDI competitiveness ought to turn for the better,” it said.
But the research group also said the country should first address structural and institutional challenges, which may prompt some investors to look elsewhere in the Southeast Asian region.
What the Marcos Jr. administration has going for it is that it benefits from several laws passed to attract investments into the country.
These include the Ease of Doing Business Law, which was passed in 2017 to cut red tape and streamline government process, and the CREATE law, passed in 2021 to introduce a more competitive selection of tax incentives.
Other liberalization reforms enacted over the last two years, namely the Foreign Investment Act, the Public Service Act and the Retail Trade Liberalization Act, indicate the business climate in the Philippines is moving in the right direction.
Despite challenges, the Philippines has built a robust and credible reform narrative that may continue to attract foreign investments.
But the country needs to improve in some areas, even as the past five years have shown the economy is pointed in the right direction.
From where we sit, we think in order to attract more foreign investments, the government should focus on implementing several key strategies.
First, improve infrastructure.
We should prioritize infrastructure development to improve transportation, communication, and energy networks.
This will not only attract foreign investors but also create better opportunities for businesses to prosper.
Second, strengthen economic policies.
We should create a more conducive business environment by implementing policies that promote transparency, efficiency, and predictability.
This will give foreign investors the confidence to invest in the country.
Third, enhance ease of doing business.
We should streamline regulatory procedures, reduce red tape, and simplify business registration processes.
This will make it easier for foreign investors to set up and operate their businesses here.
Fourth, invest in human capital.
We should invest in education and training programs to develop a skilled workforce that can meet the needs of foreign as well as domestic investors.
A well-trained workforce will not only attract more investments but also drive economic growth in the country.
Fifth, promote industry clusters.
We should focus on developing industry clusters in key sectors such as manufacturing, technology, and tourism.
This will create a more collaborative environment for businesses and attract more foreign investments.
Overall, the key to attracting more foreign investments in the years ahead is to create a business-friendly environment that promotes growth, innovation, and sustainability.
By implementing these strategies, the government can very well attract more foreign investors and stimulate economic development in the country in the years ahead. (Email: ernhil@yahoo.com)
