Philippine economy to accelerate if government pulls off infrastructure plan

MANILA, Philippines —  The Philippine economy still has room for growth given its strong fundamentals and as long as the government fulfils its infrastructure build-up in the country.

Jose Isidro Camacho, vice chairman for Asia Pacific Credit Suisse Group AG and Credit Suisse Singapore Ltd, said that while Philippines has made significant progress in growing its economy, it still has many issues to address such as infrastructure woes.

"The Philippine economy will continue to grow very strongly," he said at the two-day 43rd Philippine Business Conference and Expo which started yesterday in Manila Hotel.

Camacho, who used to be secretary of the Department of Finance emphasized that there's much positive expectation on what the government’s tax reform program and its massive infrastructure build-up program can contribute to economic growth moving forward.

He said the government should be able to take off its infrastructure program, stressing that infrastructure is a key sector that is going to drive other sectors of the economy.

"Infrastructure is so important because it's a stand-alone contributor to the economy," said Camacho, who is also chairman of Sun Life of Canada (Philippines) Inc.

The Singapore-based banker underscored that infrastructure also is a key enabler to other growth drivers of the economy, citing tourism and manufacturing whose growth also depends on the quality of infrastructure.

Camacho believes the structural reforms made in recent years have helped spur the country's growth, supported by its strong fiscal position and healthy and well-managed monetary policies.

While the Philippines is traditionally driven by its strong domestic consumption, the Credit Suisse executive also noted the country has seen an increasing investments in the last 5-6 years.

Although he said the Philippines has to open up key sectors particularly infrastructure to foreign investors, noting local conglomerates are dominating in terms of investments.

Camacho believes the Philippines is already well-recognized by foreign investors as an investment destination; it's a matter of opening up the economy to foreign players.

Earlier, the National Economic and Development Authority (NEDA) assured 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.

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.

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, according to NEDA.

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.

Among the reasons for the positive outlook of businesses, according to the recent Business Expectations Survey (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 macro-fundamentals 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. (FREEMAN)