Foreign investment pledges down 22% in Q3

MANILA, Philippines — Foreign investment commitments registered with investment promotion agencies (IPAs) dropped by more than a fifth in the third quarter from a year ago, according to the Philippine Statistics Authority (PSA).

Data released by the PSA yesterday showed approved foreign investments in the third quarter fell by 22.4 percent to P13.05 billion from P16.82 billion in the same period in 2021.

These investment pledges were filed with IPAs such as the Board of Investments (BOI), Clark Development Corp., Philippine Economic Zone Authority, and Subic Bay Metropolitan Authority.

PSA said no foreign investment approvals were reported from IPAs such as the Authority of the Freeport Area of Bataan, BOI-Bangsamoro Autonomous Region in Muslim Mindanao, Cagayan Economic Zone Authority, Poro Point Management Corp., and Tourism Infrastructure Economic Zone Authority for the third quarter of this year and last year.

“The foreign investment commitments for the third quarter of 2022 were mainly driven by investments from Japan, which accounted for 34.5 percent of the total approved foreign investments,” the PSA said, noting P4.50 billion worth of investments were pledged by Japanese firms.

South Korea came in second with a 15.5 percent share, as it pledged P2.02 billion worth of investments, followed by Singapore with a 12.6 percent share as it committed to invest P1.64 billion.

More than half or 55.2 percent of the approved foreign investment commitments in the third quarter amounting to P7.20 billion were pledged for the manufacturing sector.

Administrative and support service activities came in next with a 25.9 percent share or investment commitments valued at P3.38 billion, while real estate activities placed third with a 10.3 percent share or P1.35 billion worth of investment pledges.

In terms of location, the biggest chunk or 50.6 percent of the approved foreign investments in the third quarter were pledged for projects in Calabarzon amounting to P6.60 billion.

This was followed by Central Luzon with P3.02 billion or a 23 percent share, and the National Capital Region with P2.24 billion or a 17 percent share.

The foreign investment pledges in the third quarter of this year are projected to create 17,994 jobs.

Meanwhile, approved investments from Filipino investors reached P146.13 billion in the third quarter this year, 74.7 percent higher than the P83.66 billion in the same period last year.

Approved investments from foreign and Filipino nationals rose 58.4 percent to P159.18 billion in the third quarter this year from P100.48 billion in the same quarter a year ago.

These investment commitments from foreign and Filipino sources in the third quarter are projected to generate 28,139 jobs.

Asked to comment on the PSA data, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the approved foreign investments into the Philippines may have been weighed by higher prices or inflation, weaker peso exchange rate, and the sharp increase in US, global or local interest rates that led to higher borrowing costs or financing costs.

“Thus, some foreign investors may have waited for the peak of the US dollar, which reached a new record high at P59 in September-October 2022, though the peso exchange rate already stabilized since the last week of September 2022 at below 59 to a dollar after various measures to help stabilize the peso and overall inflation,” he said.

He said the move toward greater normalcy could lead to a pick up in foreign direct investments going forward.

Further, he said the passage of the Corporate Recovery and Tax Incentives for Enterprises Act, which reduced the corporate income tax and provided greater certainty on investments, as well as approved reforms that seek to ease foreign ownership limits such as the amendments to the Public Service Act, Foreign Investments Act, and Retail Trade Liberalization Act would encourage foreign investments into the country.

British Chamber of Commerce Philippines executive director Chris Nelson earlier told reporters there is a need to promote the recently enacted reforms easing foreign ownership restrictions to enable the country to attract foreign investments.

“The laws that were changed, that was a very good move. But we need to make sure people are aware of it and actively encourage and promote the Philippines as an investment destination,” he said.

Ricafort said membership of the country into the Regional Comprehensive Economic Partnership, which is the world’s biggest free trade agreement, would also help attract more foreign investments into the country.