Foreign investments in RP to contract this year

Approved foreign direct investments (FDIs) in the Philippines – including factories, equipment, and long-term stakes in local firms – are expected to contract this year, a government official said. “A slight contraction is possible in approved investments this year," Efren Leaño, executive director of the Management Services Group of the Board of Investments (BOI), said on Thursday. “We’ve really seen a decline." The official made these remarks while at the sidelines of the press launch of the World Investment Report (WIR) 2009 of the United Nations Conference on Trade and Development (Unctad). In the meantime, a separate UK report said that the Philippines has become more attractive to foreign investments. See story here. In 2008, the Philippines received $1.52-billion worth of foreign direct investments, nearly half of the $2.916 billion in 2007. Compared to Indonesia and Thailand, the Philippines was a laggard in terms of attracting FDIs. In 2008, Thailand got $10.091 billion, while Indonesia had $7.919 billion. To promote economic growth and create more jobs in the Philippines, the country would have to attract at least $5 billion yearly in FDIs. “I don't see hitting $5 billion this year or even next," said Dennis Arroyo, director for national planning and policy staff of the National Economic and Development Authority. Global FDI flows are expected to fall further to below $1.2 trillion this year, after declining to $1.7 trillion in 2008, Arroyo said in a separate statement. At the same time, he expects foreign direct investments to “recover slowly in 2010 and gain momentum in 2011," he said. Unctad said FDI prospects, despite an improving worldwide economy, would remain “gloomy" in the near term. “Inflows [are] expected to fall below $1.2 trillion," the WIR said. “However, recovery of these flows is expected to begin slowly in 2010 to reach up to $1.4 trillion, and will gather momentum in 2011 when the level could approach an estimated $1.8 trillion – almost the same as in 2008." Owing to FDIs slow recovery, Leaño admitted that the government is expecting fewer job creation from these investments. Governance and corruption, weak infrastructure, and high costs of utilities in the country were blamed for the rather bad foreign investor perception of the Philippines. Despite the seen slump in FDIs this year, Leaño disclosed that three investments would come on stream within the year. These include a potential $1-billion power project from China. Two other investments – in mining and infrastructure – would come from Japan and the Middle East. In the latest investment mission in China this month, a Chinese firm has expressed interest in setting up a car assembly facility in the Philippines. In the meantime, a mission in South Korea scheduled in November intends to promote the country's power, IT and BPO (business process outsourcing) sectors. - GMANews.TV