Foreign investments drop in April amid budget, trade war fears

enablePagination: false
maxItemsPerPage: 10
maxPaginationLinks: 10

Metro Manila (CNN Philippines, July 10) — Foreign investment inflows to the Philippines remained slumped in April, with lower capital infusions to local companies compared to a year ago.

The country shored up $961 million worth of foreign direct investments (FDI) during the month, improving from the $586-million haul in March, according to latest data from the Bangko Sentral ng Pilipinas. However, this was 11.8 percent lower than the $1.089 billion investments received in April 2018.

This developed after equity capital placements plunged to just $39 million, coming from the $272 million capital retained in the previous year. Gross placements dropped by half to $144 million, while withdrawals grew sevenfold to $104 million versus the $15 million plucked out a year ago.

The hottest industries for investments were finance and insurance; real estate;manufacturing; electricity, gas, steam and air-conditioning supply; and construction, the BSP said.

Reinvested earnings, or profits secured by global companies which they chose to retain for their local units, picked up to $92 million, rising from March's $80-million haul. Bets made on debt instruments, which are deemed safer than equity, likewise grew to $830 million, more than double the $399 million received in March and 12.6 percent higher than the amount secured the previous year.

The Duterte administration has been actively trying to lure more foreigners to invest in the country, as the additional capital is expected to create more jobs for Filipinos.


Prevailing market uncertainties likely kept investors on a wait-and-see mode back in April, Security Bank economist Robert Dan Roces said.

"First, the delayed passage of the spending bill may have prompted foreign investors to hold back as apprehensions on envisioned infrastructure developments led to lower investors’ confidence," Roces said when sought for comment. "Investors are always wary of uncertainties and indeed will react accordingly."

The spending plan was only signed into law on April 15, which left government with a reenacted budget that left new programs unfunded. Other factors were the escalation of the trade war between the United States and China, as well as the future of the tax reform bill targeting corporate income taxes and fiscal perks, Roces said.

READ: Latest round of U.S.-China trade talks end without agreement

This is also the second straight month of an FDI decline. The April tally brought the four-month haul to $2.903 billion, 14 percent below the $3.377 billion foreign money retained in the Philippines during the same period in 2018.

In June, the BSP scaled down its investments forecast for the year to $9 billion, lower than the original $10.2-billion projection and would also be the smallest haul since 2016. The Philippines received $9.8 billion FDIs last year.

In scaling down the forecast, then-BSP Deputy Governor Diwa Guinigundo said global trade tensions as well as the outcome of the May 13 midterm elections may have prompted investors to hold back.

Still, Roces sees room for investments to recover: "Moving forward, government spending is underway and we are seeing solid economic fundamentals, plus there is a truce and possible resumption of talks between the US and China, thus we expect FDIs to be on the upside in the second half of this year."

Catching up

On Wednesday, the Anti-Red Tape Authority got 37 state agencies to commit to turn more business-friendly. Called the Investment Promotion Unit Network, these agencies are set to reduce requirements and trim processing time for permits and other government transactions.

Simple business dealings must be cleared within three days, while "complex" ones are given up to seven days for action. Highly-technical transactions will be given a lead time of 20 days.

READ: PH recovers slightly in World Competitiveness ranking 

Trade Secretary Ramon Lopez said the country enjoys "continued confidence" from foreigners, who see "huge potential" in investing here particularly for infrastructure and power. Lopez added that he sees investment pledges to keep rising, especially after approved commitments grew by 27 percent to reach ₱304 billion during the first six months of 2019.

CNN Philippines Correspondent Rex Remitio contributed to this report.