Dominguez debunks misleading claim on supposed drop in FDIs

October 27, 2017

Finance Secretary Carlos Dominguez III has debunked unfounded concerns over the supposed drastic drop in the flow of foreign direct investments (FDIs) into the Philippines as he pointed to the recent “healthy” $2.3-billion capital infusion by two global firms in the country’s manufacturing and energy sectors.

In a statement on Friday, Dominguez said some quarters pointing to this alleged drop in FDIs have failed to present the complete picture, omitting reinvestments that should have been included in assessing FDI data.

“(These quarters have) not captured the entire data, and reinvestments by foreign companies in the Philippines have actually been quite healthy,” Dominguez said at a recent forum on the Philippine economy in Washington DC.

He cited two recent new FDIs—the $1 billion investment by Japan Tobacco International (JTI) in acquiring the assets of cigarette manufacturer Mighty Corp., and the separate $1.3 billion deal between the Philippines’ Energy Development Corp. (EDC) and a consortium of foreign investors backed by Macquarie Infrastructure and Real Assets (MIRA) and Arran Investment Pte. Ltd., which is an affiliate of Singaporean sovereign wealth fund GIC.

Dominguez said investor confidence has been boosted by such initiatives as the higher public spending on infrastructure and other priority programs, tax reform, and trimming of the Foreign Negative Investment List (FNIL).

Japanese investment house Nomura has also issued a report saying that it expects the Philippines to remain a magnet for foreign investments, dispelling misleading claims that FDIs fell by 90.3 percent year-on-year in the first half of 2017.

Nomura noted that year-on-year FDI data had been distorted by a large base effect from the purchase by Japanese banking giant Bank of Tokyo-Mitsubishi UFJ of a large stake in Security Bank last year, which led to a surge in inflows of about $2 billion in April 2016.

After omitting this base effect, Nomura estimated that total FDI inflows went up by about 65 percent year-on-year in the first half of 2017.

Nomura also said FDIs would likely pick up in the near term because of the capital infusions by Macquarie and GIC in the energy sector and JTI’s buyout of Mighty Corp.

Nomura pointed to reforms such as the shortening of the FNIL to allow more FDIs to come in and the roll-out of some foreign-funded infrastructure projects as the other factors contributing to a spike in foreign investments this year.

A report by the Department of Budget and Management also pointed to robust government spending for the month of August, which stood at P201.6 billion, representing growth of 13.9 percent year-on-year and outperforming the 9.5 percent increase recorded for the same month in 2016.

“This pushes the annual growth of disbursements as of end-August this year to 9.8 percent, up from the 9.3 percent growth for the first seven months of the year, to reach P1,777.6 billion,” the DBM said in a statement. DMS