Neda sees surge in foreign investments

The National Economic and Development Authority expects an accelerated increase in foreign direct investments this year, saying foreigners would likely follow the lead of locals in doing more business in the country.

Economic Planning Secretary Arsenio Balisacan, who is also director general of the Neda, said rising investments by local enterprises seen last year would help pave the way for a faster increase in FDIs.

“If more local businesses are becoming more confident in investing, foreigners will take this is a signal to also invest more,” Balisacan told reporters.

The government reported last Thursday that the Philippine economy grew by 7.2 percent last year, surpassing the official target range of 6 to 7 percent. This made the Philippines one of the fastest-growing economies in Asia.

Balisacan said one of the key growth drivers last year was the increase in investments by local businesses, particularly in the manufacturing sub-sector.

Manufacturing expanded by 12.3 percent last year, faster than the 5.5 percent registered the previous year. This pushed the overall growth of the industrial sector last year to 9.5 percent compared with 6.8 percent in 2012.

“Growth of the manufacturing sector can be attributed to improving business sentiment due to the country’s strong macroeconomic fundamentals,” Balisacan said.

He cited the government’s favorable fiscal situation, modest inflation and the country’s ample foreign-exchange reserves.

These factors were also cited by key international credit-rating agencies, which last year gave the Philippines its first-ever investment grade. Fitch Ratings raised the country’s credit rating by a notch from junk status to the minimum investment grade in March. Standard & Poor’s and Moody’s Investors Service followed in May and October.

Last year, FDIs to the Philippines rose significantly on the back of improved business sentiment. Gross FDIs rose year-on-year by 85 percent to $4.98 billion from January to October, documents from the Bangko Sentral ng Pilipinas showed.

The amount, however, still paled in comparison with the FDIs being cornered by neighboring countries. Indonesia, for instance, had received more than $20 billion during the period.

Historically, the Philippines has lagged behind most of its Southeast Asian neighbors in terms of FDIs. The usual reasons cited included tedious processes in setting up a business, high power and labor costs and poor infrastructure.

However, Balisacan said business sentiment was seen to improve further and fuel an even faster increase in FDIs this year amid projections that the Philippines could post yet another robust economic growth.