• Finance: FDI decline ‘may just be a blip’

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    Reforms in the manufacturing and banking sectors will attract more foreign direct investments (FDI) to the Philippines, the Finance department said on Wednesday, discounting a decline seen in the latest data as a “blip.”

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    “The small decline in 2015 may just be a blip considering that FDI has been rising 53.1 percent annually for three years, 2012 to 2014,” the department said in its latest Economic Bulletin.

    The Bangko Sentral ng Pilipinas last month reported that the country saw net FDI hit $4.98 billion for the January to October period, down 4.9 percent from a year earlier.

    The Finance department pointed out that the top sectors for FDI, such as manufacturing and financial and insurance activities, continued to attract inflows.

    For the 10-month period, the manufacturing sector accounted for $624 million while financial and insurance activities contributed $531 million.

    “The robust rise in FDI for manufacturing and financial sector is due to the launching of two new reform programs—Manufacturing Resurgence Program and the Bank Liberalization Law,” the department said.

    Implemented by the Trade department, the Manufacturing Resurgence Program aims to rebuild industry capacities, strengthen new ones and maintain the competitiveness of sectors with comparative advantages.

    It also seeks to build up agriculture-based manufacturing that generates employment and support more smallholder farmers and cooperatives through product development, value-adding and integration with big enterprises for marketing and financing purposes.

    Further liberalization of the banking industry, meanwhile, has been touted previously as attracting more FDI to the Philippines.

    The Philippine banking industry was further liberalized with the signing in 2014 of Republic Act 10641, which allows foreign banks to acquire up to 100 percent of the voting stock of an existing domestic bank, removing the 60 percent limit on foreign equity.

    Foreign banks can also operate in the Philippines by investing in up to 100 percent of the voting stock of a new banking subsidiary incorporated under local laws or by establishing branches with full banking authority.

    At present, six foreign banks have been given the green light to set up a branch in the country, starting with Japanese lender Sumitomo Mitsui Banking Corp. that was granted Monetary Board approval in February last year.

    It was followed by South Korea’s Shinhan Bank in March, Taiwan’s Cathay United Bank in
    April, Industrial Bank of Korea in May and Yuanta Commercial Bank Co. in July. The latest was Singapore-based United Overseas Bank, which secured approval in September.

    “These sectors will undergo further expansion in quarters ahead,” the Finance department said.

    It suggested that other departments’ planning units look for opportunities for reform to experience a similar FDI resurgence in their respective industries.

    Sectors with small FDI still have significant growth opportunities, the Finance department said.

    “Construction, arts and recreation services, and education are expected to enjoy more infusion due to the country’s skills endowment,” it claimed.

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