THE PHILIPPINES was one of Asia’s “rising stars” in attracting foreign direct investments (FDI) last year and is among economies “expected to enjoy significantly better trade prospects this year,” according to a report the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) released on Oct. 30.
The Asia-Pacific Trade and Investment Report 2017, titled: “Channelling Trade and Investment into Sustainable Development,” prepared by ESCAP’s Trade, Investment and Innovation Division, noted that while FDI flows to Southeast Asia fell by 20% in 2016 — due largely to “declining inflows to Indonesia, Thailand, Singapore and Malaysia” — and Asia Pacific as a whole saw a 2.8% drop, the same year was marked by record-highs in the Philippines and Vietnam.
Bangko Sentral ng Pilipinas (BSP) data show the Philippines got a record $7.93 billion in net FDI inflows last year, 40.7% above the $5.64 billion recorded for 2015 and surpassing by 18.4% the $6.7 billion projected by the central bank for 2016.
Net FDI inflows to the Philippines dropped by 16.5% year-on-year to $3.904 billion in the seven months to July, according to central bank data, due to a significant one-time inflow that fueled April 2016’s record $2.244 billion.
“[T]he Philippines and Vietnam have been rising stars,” the report noted, with FDI to the Philippines “attracted by strong macroeconomic fundamentals and robust growth” that clocked 6.9% in 2016 against a 6-7% government goal for that year and which is targeted at 6.5-7.5% this year.
Attracting FDIs to Asia, the report said, is the fact that “[m]any countries in the region relaxed restrictions on foreign ownership.”
Among others, “India, the Philippines and Thailand all allowed increased foreign ownership in the financial services sector via policy measures during 2016.”
“In addition, the Philippines allowed 100% of foreign ownership in adjustment companies, lending companies, financing companies and investment houses.”
The current government of President Rodrigo R. Duterte is taking this thrust a step further, identifying ways to lift or at least ease restrictions on foreign ownership and participation in Philippine businesses and sectors without having to undergo the tedious process of amending the Constitution. A move to amend Commonwealth Act No. 146 — or the Public Service Act enacted in November 1936 — for instance, aims to update the definition of “public services” and “public utility” in order to allow greater foreign participation in sectors like telecommunications.
The Philippines is also among Asian countries — including Cambodia, India and Kazakhstan — that has simplified procedures for foreign investments, streamlining business permit and licensing systems as well as moving to repeal unnecessary laws.
In terms of trade in goods, Southeast Asia saw a 1.7% decline in merchandise exports last year — “though still better than the Asia-Pacific on average where exports fell 4.4% in 2016” — while merchandise imports declined by 1.2% in 2016 — also better than Asia Pacific as a whole that saw imports drop 4.3%.
In comparison, last year saw Philippine merchandise export sales fall 2.4% to $57.406 billion and import payments grow 8.9% to $84.108 billion.
This year, in contrast, has reflected a recovery in foreign demand that propelled Philippine export sales up 13.571% to $31.043 billion last semester, while merchandise imports grew 9.631% to $44.216 billion.
“Countries previously affected by the slowdown of global value chains, such as… Korea and the Philippines, are expected to enjoy significantly better trade prospects this year,” the report read.
Southeast Asia’s service trade fared better with growth rates of 3.3% for exports and 0.9% for imports in 2016. The region’s export recovery was stronger than Asia Pacific’s 0.1%.
“Australia, Indonesia, Japan, the Philippines, Thailand and Vietnam improved their service export performance, as did the small emerging economies Bangladesh, Bhutan, Tonga, Vanuatu and Mongolia,” the report read.
“Overall, these economies contributed to the weak but positive results for the region as a whole.”
ESCAP cited the Philippines among economies that drove Asia-Pacific’s 3.7% telecommunication, computer and information service growth with a 58.6% expansion, together with Japan (16.5%), Australia (10.5%), Pakistan (10.9%) and Thailand (10.6%). India, however, continued to dominate this subsector in the region with a 46.2% share, followed by China with 21.2%.
Last year also saw tourist arrivals in Asia and the Pacific grow by 3.3%.
Seven of Southeast Asia’s economies logged growth faster than five percent, namely: Vietnam (24.6%), Indonesia (15.5%), the Philippines (11.3%), Thailand (8.9%), Singapore (7.7%), Timor-Leste (6.6%) and Cambodia (5.0%).
Overall, ESCAP said, Asia Pacific’s trade outlook “is positive for this year but some uncertainties are forecast for 2018.”
Further cutting trade costs and deepening regional cooperation, it said, “may result in $100 billion more exports for the region annually.”
FDIs are “expected to rebound this year,” which will also see an average 4.5% export growth.
In launching the report in Bangkok, United Nations Under-Secretary-General and ESCAP Executive Secretary Shamshad Akhtar cited trade and investments’ role in achieving the Sustainable Development Goals (SDGs).
“The impact analysis of different policy scenarios featured in the report make it clear that SDGs cannot be achieved through protectionist policies,” a press release accompanying the report quoted Mr. Akhtar as saying.
“What we need is targeted trade and investment liberalization policies that are more inclusive and mindful of the social and environmental dimensions of sustainable development.”
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