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Monday, October 23, 2017 | MANILA, PHILIPPINES
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   economic indicators

Date posted: Sunday, June 18, 2017 | Manila, Philippines

BY Lourdes O. Pilar Researcher

FDI pledges drop in first quarter

FOREIGN DIRECT INVESTMENT (FDI) commitments dropped in the first three months from a year ago, marking their third straight quarter of contraction.

Preliminary Philippine Statistics Authority (PSA) data show that approved FDI pledges -- which are commitments until they materialize -- registered with the country’s seven investment promotion agencies (IPAs) fell 12.8% to P22.883 billion in the first quarter from P26.243 billion approved in 2016’s comparable three months.

The decline was the third straight quarter of contraction after the 45% and 9.3% respective drops recorded in the third and fourth quarters of last year.

Combined investment pledges by both foreigners and Filipino nationals totaled P121.456 billion in the first quarter, 21.8% more than the year-ago P99.698 billion.

IPAs are government agencies that by law are authorized to grant tax and non-tax incentives to investors putting up businesses or expanding existing ones in the country. The seven IPAs are the Board of Investments (BoI), Clark Development Corporation (CDC), Philippine Economic Zone Authority (PEZA), Subic Bay Metropolitan Authority (SBMA), Authority of the Freeport Area of Bataan (AFAB), BoI-Autonomous Region in Muslim Mindanao (BoI-ARMM) and Cagayan Economic Zone Authority (CEZA).

The three months to March saw PEZA contributing the most foreign investment pledges at 86.4% with P19.772 billion, up 25% year on year. This is followed by the BoI with an 8.3% share at P1.896 billion, though 77.6% less than a year ago. Rounding the rest of the IPAs were CDC’s 3.696% share at P845.693 million (with a 71.6% growth), SBMA’s 1.4% at P315.315 million (-9.4%) and CEZA’s 0.2% at P54.116 million (up 131.6%).

No data were available for AFAB and BoI-ARMM.

FDI that actually came in during the first quarter -- tracked separately by the central bank -- actually climbed 16.6% to $1.56 billion from the $1.337 billion that entered in 2016’s comparable three months, an increase economists have attributed to the lure of the country’s generally sound macroeconomic fundamentals.

Sought for comment, Angelo B. Taningco, economist at Security Bank, said “expectations of rising inflation amid increasing production costs and peso depreciation may have partly contributed to the drop in approved foreign investments.”

By industry, manufacturing bested other industries as it got 65.6% of the total at P15.013 billion, growing by 52.9% from a year ago. Administrative and support services came next with a 15.381% share at P3.52 billion, though down 34.9%, while real estate activities came in third with 14.995% share, growing nearly sevenfold to P3.431 billion.

Besides administrative and support services, other decliners in the period were construction (-95.2%); electricity, gas, steam and air conditioning supply (-94.9%); transportation and storage (-94.6%); information and communication (-93.3%); wholesale and retail trade; repair of motor vehicles and motorcycles (-44.6%); as well as financial and insurance activities (-43.2%).

The Netherlands was the top source of investment commitments with P6.223 billion accounting for 27.2% of the total (though down 22.7% year-on-year), followed by Singapore and the United Kingdom, pledging P4.304 billion (up 74.6%) or 18.8% and P3.633 billion (up 97%) or 15.9%, respectively.

CALABARZON -- the region immediately below Metro Manila that consists of Cavite, Laguna, Batangas, Rizal and Quezon -- got the most investment pledges in the first quarter at 67.007% of the total at P15.333 billion, more than double the year-ago P7.554 billion.

The National Capital Region (NCR) got the second-biggest pledges with 11.73% at P2.684 billion, though less than half the year-ago P5.778 billion, Central Visayas came third with 10.891% at P2.492 billion and Central Luzon was fourth with 6.961% at P1.593 billion, down 14.9%.

“The numbers indicate a non-usual preference by various investors. This shows the attractiveness of investing outside of Metro Manila and that there are existing opportunities beyond the usual center,” said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines.

Despite the overall decline in first-quarter foreign investment commitments, he said: “Moving forward, I still see approved FDIs improving and growing.”


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