Global financial services company Credit Suisse described the Philippines as a “winner” in terms of attracting foreign direct investments compared with its Southeast Asian peers amid the slowdown in China.
Credit Suisse said in a report the Philippines, along with Vietnam, emerged as winners in terms of attracting investments, while previous FDI favorites Indonesia, Singapore and Thailand saw some weakening trends.
“The Philippines and Vietnam saw rising FDI…. The Philippines’ FDI is now at a multi-decade high of $8 billion as of April 2016, up from $6 billion in 2015 and $1 billion just five years ago, with this also surpassing Thailand,” the Swiss bank said.
“Japan and the US are key drivers behind this increase and are concentrated in the manufacturing and more recently, the finance industry, post liberalization of this sector,” Credit Suisse said.
Observers predicted that Asean could see an increase in FDI inflows as China became a less attractive FDI destination. Credit Suisse, however, said it did not see a significant pickup in FDIs in most Asean economies under its coverage, and in fact saw a decline.
“However, there is significant divergence among countries, with Vietnam and Philippines emerging as winners and Malaysia staying surprisingly resilient, while the previous FDI favorites including Indonesia, Singapore and Thailand saw some weakening trends,” it said.
“The observed trends are broadly in line with our expectations, and we expect them to largely continue with the exceptions of Malaysia and Indonesia,” the report said.
Credit Suisse said other “push factor” contributing to the less optimism in China were political tensions with Japan, rising wages and moderating domestic demand.
It said while it was true that foreign direct investments inflows into Asean economies seemed to have been more resilient than those into China and Hong Kong together, overall FDIs into Asean-6 still saw a decline in US dollar terms.
It said this weakness in Asean FDIs probably reflected broader macro trends including the still weak outlook for exports and investment globally.
Latest data from Bangko Sentral ng Pilipinas showed that net inflows of foreign direct investments in April surged 476 percent to a record $2.2 billion from $382 million a year ago.
Bangko Sentral said investors remained optimistic in the Philippines “as the economy continued to post strong growth and show even better growth potentials.”
This brought net FDIs in the first four months to $3.5 billion, higher than $1.233 billion a year ago.
The bulk of the net inflows during the month was in the form of debt instruments, or lending by parent companies abroad to their local affiliates to fund existing operations and business expansion, which amounted to $1.3 billion, or more than four times the $276 million a year ago.
FDI net inflows hit $5.72 billion in 2015. Bangko Sentral expects net inflows of foreign direct investments to increase to $6.3 billion this year.