October 10, 2017

MANILA– The National Economic and Development Authority (NEDA) on Tuesday gave the assurance that foreign investors remain confident to do business in the Philippines despite the 14 percent decline in foreign direct investments (FDI) in the first half of 2017.

The NEDA likewise clarified that foreign equity placements, which Senate minority leader Franklin Drilon pointed out during the Senate interpellation last week on NEDA’s proposed budget, is only a component of total FDI. Other components of FDI are reinvestment of earnings and intra-company loans or debt instruments.

According to the data released by the Bangko Sentral ng Pilipinas (BSP), FDI posted a net inflow of US$674 million in June 2017, an increase of 182.7 percent from US$238 million for the same period last year.

For the first half of 2017, FDI registered net inflows of US$3.6 billion, 14 percent lower than the US$4.2 billion net inflows posted in the same period last year. This was due to a sharp decline in the net equity capital. Equity capital declined to US$141 million in the first half of 2017 from US$1.448 billion in the same period last year. 

Drilon at the Senate plenary on Friday expressed concerns over what he said “a significant deceleration in the influx of new investments.”

But NEDA, however, explained that figure on foreign equity placements is not the entire FDI.

“While the data on equity placements serve as a gauge of new FDI entry and overall investor confidence, the figure is not complete. The figure does not show the total inward investments made by foreign investors in the country,” NEDA Officer-in-Charge, Undersecretary Rolando G. Tungpalan said.

The huge decline in the net equity capital is also attributed to a high base year. The BSP data in the first half of 2016 showed that the net equity capital grew by 121.5 percent on account of the combined effects of higher gross equity capital placements and lower gross equity capital withdrawals.

Tungpalan also underlined the rosy business outlook for the last quarter of 2017, citing results of the Business Expectations Survey (BES) quarterly conducted by the BSP. Respondents in the BES were drawn at random from the combined list of the Securities and Exchange Commission’s Top 7,000 Corporations in 2010 and Business World’s Top 1,000 Corporations in 2015.

Among the reasons for the positive outlook of businesses, according to the BES, are the uptick in the consumer demand during the holiday, harvest and milling seasons, and the government’s massive infrastructure spending program.

Meanwhile, NEDA is exhausting all measures to further improve the business climate in the Philippines, particularly easing foreign restrictions on several areas of business through the foreign investment negative list (FINL). A draft FINL is now up for review and adoption by the NEDA Board, which is chaired by President Rodrigo Duterte.

The present administration’s economic team is also pushing to strengthen the country’s macrofundamentals through the Tax Reform for Acceleration and Inclusion (TRAIN) bill, which is expected to have a tax yield of P133.8 billion if passed in both houses and enacted into law.

The tax reform package is a crucial component of the government’s massive infrastructure program, “Build Build Build.”

To further attract more foreign investment, President Duterte’s economic managers have been holding a series of Philippine Economic briefings overseas. The delegation which includes Socioeconomic Planning Secretary Ernesto M. Pernia, Budget Secretary Benjamin Diokno, and Finance Secretary Carlos Dominguez III will be in New York City to talk on investment opportunities in the Philippines.