PPP seen to boost FDI inflows

MANILA, Philippines – The much-awaited launching of the Aquino government’s public private partnership (PPP) scheme would pave the way for the strong recovery in foreign direct investment (FDI) inflows into the Philippines, an official from the Bangko Sentral ng Pilipinas (BSP) said.

BSP Deputy Governor Diwa Guinigundo said in an interview with reporters that worthwhile projects under the administration’s PPP program would help attract foreign investors to invest in the Philippines.

“It is just a matter of time before we finally see the initial launching of the PPP projects. Once these are launched, that should usher in the coming of FDIs in a strong way because that should establish the fact that the Philippines is truly capable of conceptualizing big projects with big economic and social impacts,” Guinigundo stressed.

He pointed out that the Philippines is having difficulty competing with other countries for FDI inflows due to the country’s poor infrastructure, higher cost of doing business, higher power costs, among others.

“It is very difficult to compete with other countries in the region particularly China, Malaysia, Singapore, Indonesia, Thailand, and even Vietnam because they are so much ahead of us in terms of infrastructure and because doing business is also much reduced in these jurisdictions,” the BSP official said.

For one, he cited, that the government needs to partner with the private sector in bringing down the cost of power in the Philippines.

“That is why the trust towards privatization is a good thing because competition will bring about lower cost of power and there will better use of technology in getting the power close to the end users,” he added.

Latest data from the BSP showed that FDI inflows eased 15.1 percent to $552 million in the first four month of the year from $650 million in the same period last year due to the generally sluggish growth in advanced economies led by the US and Japan as well as the debt crisis in Europe.

The BSP said equity placements fell 23.9 percent to $150 million from January to April compared to $197 million in the same period last year while withdrawals plunged 48.4 percent to $49 million from $95 million. This translated to a slight one percent rise in net equity capital to $101 million from $102 million.

Major sources of FDIs include the US, Singapore, Hong Kong, Japan, and the Netherlands. The bulk of the investments went to real estate, mining, manufacturing, wholesale and retail trade utilities and construction sectors.

The net inflow of other capital account consisting largely of intercompany borrowing between foreign direct investors and their subsidiaries or affiliates in the Philippines fell 20.7 percent to $283 million in the first four months from from $357 million in the same period last year while reinvested earnings retreated 12 percent to $168 million from $191 million.

Guinigundo said President Aquino has reiterated the government’s commitment to pursue good governance during his State-of-the-Nation-Address (SONA) the other day. –Lawrence Agcaoili (The Philippine Star)