Net inflows of foreign direct investments reached $8.4 billion in the first 11 months of 2022, near the full-year target set by the Bangko Sentral ng Pilipinas, as the government continued to promote the Philippines as an investment hub in the region.
The Bangko Sentral ng Pilipinas said that FDI net inflows amounted to $793 million in November, lower by 43.6 percent than $1.4 billion a year earlier amid the prevailing high interest rates globally.
“This resulted from the drop in non-residents’ net investments in debt instruments and reinvestment of earnings. Meanwhile, net placements of equity capital rose year-on-year for the third consecutive month,” the BSP said in a statement Friday.
Equity capital placements came mostly from Japan, Singapore and the United States. These were invested largely in the manufacturing, information and communication and real estate sectors.
The November figure brought the 11-month FDI net inflows to $8.4 billion, down 13.4 percent from $9.l7 billion a year earlier, but near the full-year $8.5-billion projection set by the BSP.
Data showed that non-residents’ net investments in debt instruments and reinvestment of earnings declined while their net placements of equity capital increased during the period.
“The slowdown in the net FDI data may also have to do with higher short-term interest rates and the peak in long-term interest rates in the US, globally, [and] locally that increased borrowing costs, risk of recession in the US [which is the world’s largest economy]… all of which dragged on investments,” Rizal Commercial Banking Corp. chief economist Michael Ricafort told Manila Standard.
He said net FDIs could recover in the coming months as the economy reopened towards greater normalcy.
“[The] Philippine economy [is] still expected to have one of the fastest growth rates in the region,” Ricafort said, adding that the country’s attractive demographics, China’s reopening and investment commitments obtained by the Marcos administration from overseas trips in recent months would forebode higher FDIs.
The BSP earlier lowered the 2022 FDI target to $8.5 billion from the previous estimate of $10.5 billion, taking into account the uncertain global trade environment. These headwinds included the more subdued global growth projection, higher inflation, continuing war between Russia and Ukraine and the COVID-19 pandemic.
Net FDI inflows posted a record $12.4 billion in 2021, breaching the previous high of $10.3 billion in 2017.
President Ferdinand Marcos Jr., in his five-day official visit to Japan, received investment commitments from different companies. He witnessed the signing of 35 business agreements, including a memorandum of cooperation between the Philippines and Japan, awarding of certificate of gratitude to the government of Japan and the Ministry of Foreign Affairs of Japan and the signing of several letters of intent and agreements between the Philippine government and businesses with major Japanese companies.
Trade Secretary Alfredo Pascual and Japan External Trade Organization chairman and chief executive Nobuhiko Sasaki signed a government-to-government agreement that aims to foster stronger economic cooperation and partnership between the two countries. JETRO is a government-related organization that works to promote mutual trade and investment between Japan and the rest of the world.
“We recognize Japan as one of our longstanding bilateral partners in strategic trade. Through this MOC with JETRO, we aim to establish bilateral trade agreements, which focus on gathering more Foreign Direct Investments in the country. This complements our government’s initiatives aimed at continuing the Philippines’ robust economic recovery and expansion,” Pascual said.
Pascual co-signed 21 Letters of Intent/Agreements (LOIs/LOAs) with Japanese companies such as ASTI Corporation, Brother Industries Ltd., Toyota Motor Corporation, and NIDEC-SHIMPO CORPORATION for manufacturing, Itochu Corporation for pineapple plantation, Kenko Tokina Co., Ltd., Japan Tobacco Inc., KURABE INDUSTRIAL CO, LTD., Murata Manufacturing Co. Ltd., Tamiya, Inc., MinebeaMitsumi Inc.,TDK Corporation, and Yamaichi Electronics for factory expansion, and Marubeni Corporation for energy, healthcare, transportation, and afforestation projects.
Meanwhile, in terms of renewable energy, Secretary Pascual also signed an LOI with RENOVA, Inc. Other LOIs signed were under telecommunications and property development with Sojitz Corporation, transportation with Mitsubishi Corporation, autoparts and automobile with MITSUBISHI MOTORS CORPORATION, and Kiln renewal, distribution terminal, and berth reinforcement project with TAIHEIYO Cement Philippines Inc.
These LOIs/LOAs are expected to materialize within the yearand boost the government’s initiatives on exports development, MSME development, infrastructure connectivity, transportation efficiency, manufacturing expansion, renewable energy pursuits, and altogether generate more jobs for Filipinos.