Confidence still high despite drop in foreign investments

Despite a dip in foreign investment pledges at the start of the year, investor confidence remains high, especially among domestic enterprises, the head of the Duterte administration’s economic team said.

“The total approved investments of both Filipinos and foreigners in the first quarter of 2018 actually grew by 52.3 percent, or P63.5 billion more than in 2017. Trust in the economic policies of the Duterte administration can also be seen in the P170.8 billion worth of investments pledged by Filipino nationals during the same period,” Finance Secretary Carlos G. Dominguez III told reporters late Thursday.

Dominguez was reacting to the Philippine Statistics Authority’s latest report on total approved foreign investments, which showed that the commitments of foreign firms with the country’s seven investment promotion agencies (IPAs) fell 37.9 percent year-on-year to P14.2 billion during the first three months.

IPAs give away fiscal and non-fiscal incentives to investors, which the Duterte administration wanted to rationalize under the proposed second tax reform package.

When these foreign investors’ commitments materialize, usually after a couple of years, they are then counted as foreign direct investment (FDI).

As noted by Dominguez, total first-quarter pledges, which include those of local investors, reached P185 billion, of which 92.3 percent were committed by Filipino companies.

The PSA report, however, showed that of the 33,704 jobs to be generated by the first-quarter total investment approvals, 22,535 or two-thirds would be from foreign projects. This means Filipino-led projects, despite their bigger investments, are not as labor-intensive.

Also, Dominguez said that “if we look at approved investments and actual investments during the past years, you can see that since 2012, approved investment figures have been dropping annually yet actual FDI is consistent in reaching record-highs every year—last year we even recorded FDI at $10 billion.”

“So I think we should not read too much into this particular report and instead focus on actual FDI figures,” Dominguez added.

PSA data showed that from 2012’s record P289.5 billion in foreign investment approvals, these fell to P274 billion in 2013, P186.9 billion in 2014, P245.2 billion in 2015, P219 billion in 2016 and a 12-year low of P105.7 billion in 2017, the first full year of the Duterte administration.