Foreign investments

Foreign investment rebounds in Q2


FOREIGN INVESTMENT commitments rebounded in the second quarter, ending five consecutive quarters of decline, signaling the country’s attractiveness after the adoption of the law which gradually reduces corporate tax.

Preliminary data from the Philippine Statistics Authority (PSA) showed that approved foreign investment rose 45.5% to 22.50 billion pesos in the second quarter, from 15.46 billion pesos recorded a year ago. a year.

The April-June growth was a reversal from the 32.9% decline in the first three months and the 68.8% decline in the second quarter of 2020.

It also ended the decline in foreign investment pledges that began in the first quarter of last year when the coronavirus pandemic began.

PSA data also showed the level of foreign investment was the highest in two quarters or since the 36.49 billion pesos committed in the last three months of 2020.

Projects approved with foreign interests in the second quarter are expected to generate 17,013 jobs, down 22.1% from a year ago.

Meanwhile, investment pledges from Filipinos during the period fell 89.2 percent year-on-year to 60.28 billion pesos. It accounted for 72.8% of combined local and foreign liabilities worth 82.78 billion pula, down from 85.6%.

If foreign and local commitments materialize, these projects should generate 25,056 jobs, or 31.5% less than the 36,572 additional jobs expected a year ago.

PSA’s foreign investment commitments differ from the actual foreign direct investment (FDI) tracked by the Bangko Sentral ng Pilipinas for balance of payments purposes. Central bank monitoring also goes beyond projects and includes other items such as reinvested earnings and lending to Philippine units through their debt instruments.

Colegio de San Juan de Letran graduate school dean Emmanuel J. Lopez attributed the second-quarter rebound to investors’ “continued confidence” in the country’s economic recovery.

“After more than a year of recession, the economy is back on its feet. This, despite the quarantine restrictions put in place which continue to hamper the growth of the economy,” he said in an email interview.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the growth can be attributed to the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act which was signed into law in March. He noted that CREATE may have increased the Philippines’ attractiveness to foreign investors, as the law lowered the corporate tax rate to 20% – a level closer to other Southeast Asian countries. .

“Additionally, the CREATE Act has also provided greater certainty for investment incentives, thus making more foreign investors more decisive to set up shop in the country,” Ricafort said.

“Mathematically, weak base/denominator effects, given the severe lockdowns in the previous year (Q2 2020) also quantitatively led to higher year-on-year growth in foreign investment pledges,” he added.

The government has investment commitments from seven investment promotion agencies, which are authorized by law to provide tax and non-tax incentives to investors establishing businesses or expanding existing businesses in priority sectors.

The investment pledges tracked by the statistical agency are the Philippine Economic Zone Authority (PEZA), Board of Investments (BoI), Clark Development Corp. (CDC), Subic Bay Metropolitan Authority (SBMA), Bataan Free Zone Authority (AFAB), BoI-Bangsamoro Autonomous Region in Muslim Mindanao (BoI-BARMM) and the Economic Zone Authority of Cagayan (CEZA).

The BoI contributed the most to foreign pledges with a share of 65.7% (14.78 billion pesos). This was followed by PEZA’s 22.3% share at 5.02 billion pesos, CDC’s 9.6% share at 2.15 billion pesos, AFAB’s 2.3% share at 509 million pesos and the 0.1% share of CEZA at 25 million pesos and the 0.1% share of SBMA at 20.5 million pesos. .

No data on investment authorizations by foreign nationals has been provided by the BoI-BARMM.

By industry, 55.7% of total foreign investment pledges of 12.53 billion pesos went to the information and communication sector, followed by construction with 16.1% (3.62 billion pesos). pesos) and manufacturing with 10.1% (2.27 billion pesos).

More than half of the foreign investments pledged in the second quarter came from the United Kingdom (12.52 billion pula), followed by South Korea (2.25 billion pula) and the United States (2.13 billion pula). pulla).

Most of the foreign investment will fund domestic projects worth 12.52 billion pesos. Central Luzon grabbed 16.3% (P3.66bn), while Calabarzon secured a 9.36% (P2.11bn) share.

Lopez expects foreign investment to pick up momentum over the next two quarters.

“Restrictions are expected to ease and investment should flow in due to increased consumer spending coupled with expected election spending, although temporary will provide economic and investment spending relief,” he said. — Abigail Marie P. Yraola