Foreign investment pledges sink in Q1

MANILA, Philippines — Foreign investment pledges dropped in the first quarter, putting them in a precarious period of uncertainty as the Philippine economy is still recovering from the pandemic.

Data from the Philippine Statistics Authority on Tuesday revealed total foreign investments in the country's economic zones crashed 54.1% year-on-year to P8.98 billion in the January-March period.

Most of the investment commitments, or 39.7% of it, came from Japan, which pledged P3.56 billion. This was followed by South Korea and Singapore, which committed P1.66 billion and P1.63 billion, respectively.

While these pledges may or may not translate to actual inflows in the future, they serve as vital gauge of sentiment especially since investment decisions on this front are greatly affected by tax perks offered them. They are also different from the central bank’s own measure of FDI inflows, which is on a net basis and uses a threshold of at least 10% foreign equity to be included in the tally.

Sought for comment, Sonny Africa, executive director on nonprofit IBON Foundation explained what this dip means, considering that the Philippines was in an election year.

"Foreign investment pledges and even actual flows are very volatile on a quarterly basis. But even looking at yearly pledges, there isn't a clear pattern around national election years -- it dipped slightly in 2016, before that it increased a lot in 2010 and 2004, and fell a lot in 1998," he said in a Viber message.

More than half of those foreign investments, or P4.87 billion, will bankroll projects in Calabarzon (Region IV-A). Another P1.66 billion-worth of pledges will fund projects in Cagayan Valley, while projects in Central Visayas will be financed by P986.59 million from investments overseas.

Data dissected showed that the manufacturing industry will receive investment pledges totalling P5.15 billion while projects involving electricity, gas, steam, and air conditioning supply attracted foreign investments worth P1.66 billion. Investments in the administrative and support service sector came last, hauling in P977.37 million.

Africa said investments take time to be ingested and processed by the economy since any growth, such as one observed in the first quarter of 2021, could be a result of projects that began after the period of strict curbs imposed in 2020.

That said, the PSA noted that these projects from foreigners and Filipinos were forecasted to generate a total of 14,416 jobs in the market, a welcome development for Filipinos as employment around the country is still on the mend from pandemic fallout. 

Africa reckoned that it is still hard to forecast whether this slump could prove to be a pattern.

"We don't think that the Marcos administration per se will discourage foreign investment because we expect a conservative pro-market and foreign investor-hungry economic team," he said.

"What might alter the equation though is instability if Marcosian ambitions exceed the capacity of politicians to manage their contradictions, or if the fragile global economy takes a turn for the worse from inflation, stagnation, and financial crisis," he added.