The Philippines still has a lot of catching up to do in attracting foreign direct investments, even if FDIs for the full-year 2013 rose by 20 percent to $3.9 billion.
Net FDIs for the whole of 2013 rose from $3.2 billion in 2012, because of good macroeconomic numbers, as well as foreign firms funding the expansion of their local units, the Bangko Sentral ng Pilipinas (BSP) said in a statement.
The 20 percent increase in FDI during the year was driven by “investors’ confidence in the country’s sound macroeconomic fundamentals . . . This developed as parent companies abroad continued to lend to their local affiliates to fund existing operations and expansion of their businesses in the country,” the BSP said.
The rise could have been bigger if not for an 18.5-percent year-on-year drop in FDI in December 2013 to $180 million.
Bank of the Philippine Islands Economist Nicholas Antonio Mapa observed that despite the FDI increase last year, the country still lagged behind its Southeast Asian neighbors in attracting foreign investors.
Vietnam attracted $13.1 billion in FDI in the first 10 months of last year, while Thailand expects to post as much as $33 billion in foreign investments for 2013.
Mapa acknowledged that the Philippine FDI data may also indicate that the country has started attracting foreign investors anew for its business opportunities, given the country’s strong gross domestic product (GDP) growth.
“This signals that foreigners are taking notice of the strong growth potential of the country, given our recent strong GDP numbers and investment grade status,” Mapa said.
“However, we continue to lag the region in terms of attracting FDI, which most investors attribute to the decrepit infrastructure, high power rates, and legal implications in doing business in the Philippines,” he added, referring to foreign firms getting tangled in court cases in the Philippines.
The BPI economist said that the country needs “better infrastructure, reliable power and better legal protection for investors . . . to help us attract more FDI.”
“We need to do more to bring in these FDI flows as they will help generate jobs and facilitate inclusive growth that has remained elusive for most of our history,” Mapa said.
According to the latest BSP data, the bulk of gross equity capital placements originated from Mexico, Japan, the United States, British Virgin Islands and Singa–pore, which were channeled mainly into manufacturing; water supply, sewerage, waste management and remediation; financial and insurance; real estate and mining and quarrying.