PHL only one in Southeast Asia to avoid shrinking FDI

By Elijah Felice Rosales, 26 Jan 2021, Businessmirror

THE Philippines was the lone economy in Southeast Asia to avoid a contraction in foreign direct investments (FDI) last year, as FDI inflows to the country went up 29 percent in spite of all the challenges posed by the Covid-19 pandemic.

Based on the 38th Global Investment Trends Monitor, the Philippines was the only country in Southeast Asia to pose an FDI growth last year. Overall, FDI applied to region fell by 31 percent to $107 billion, attributed to the slide in investments made to its largest recipients.

“FDI flows to the Philippines, bucking the trend, rose by 29 percent to $6.4 billion,” the report read.

In 2019 FDI that flowed into the Philippines crashed by nearly 25 percent to $4.99 billion, from $6.6 billion in 2018. That was the second consecutive year FDI figures stumbled double digits, putting Manila in a catchup position with its rivals in Southeast Asia.

This year, when compared against competitors in the region, the Philippines secured the fourth highest FDI for 2020, the pandemic year, to trail Singapore, Indonesia and Vietnam, but jumped ahead of Malaysia and Thailand.

The report showed FDI recorded in Singapore declined 37 percent to $58 billion, while those of Indonesia and Vietnam dropped by 24 percent and 10 percent to $18 billion and $14 billion, respectively. Further, Malaysia endured a 68-percent setback to accumulate just $2.5 billion in FDI, while Thailand suffered a 50-percent dive to obtain $1.5 billion.

“The strength of Southeast Asia as a region remained evident; announced Greenfield investment contracted more moderately [-14 percent] than in other developing regions,” the report added.

Across the region, investments made in new greenfield projects amounted to more than $70 billion, the largest volume among all developing economic blocs in the world. Likewise, the region’s trading leader Singapore saw an uptick in new projects in the third quarter to signal a looming FDI recovery for all of Southeast Asia.

Variance with reports

Published by the United Nations Conference on Trade and Development (Unctad), the report concluded global FDI inflows this year will remain weak.

The Unctad report added “investors are likely to remain cautious in committing capital to new overseas productive assets.” Worse, the effects of the recession experienced by the economies will linger on and FDI recovery may just begin to take form on or before 2022.

The report of a positive FDI growth in the Philippines appears to contradict official data from investment promotions agencies, particularly the Board of Investments (BOI) and the Philippine Economic Zone Authority (Peza), showing they bled losses in 2020.

For one, investment pledges filed before the BOI last year declined by more than 10 percent to P1.02 trillion, from P1.14 trillion in 2019. On the other hand, capital applied to the Peza zones slid almost 20 percent to P95.03 billion, from P117.54 billion.

RCEP key

The report also pointed to the signing of the Regional Comprehensive Economic Partnership (RCEP) last year as key to the economic rebound of the region.

The RCEP is one of the world’s largest trade deals, covering the 10 Southeast Asian countries and their trading allies Australia, China, Japan, New Zealand and South Korea. The trade pact reduces the tariff rate of nearly all of the products traded by the signatories, and eases restrictions on investments, services, movement of people, e-commerce and dispute settlement.