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Philippines bucks global decline in FDI

FOREIGN DIRECT INVESTMENTS to the Philippines likely went up in 2020, according to a report by the United Nations Conference on Trade and Development. — PHILIPPINE STAR /MICHAEL VARCAS

By Jenina P. Ibañez, Reporter

FOREIGN DIRECT INVESTMENTS (FDI) to the Philippines rose by almost a third in 2020, a stark contrast with the collapse in global FDI amid the coronavirus disease 2019 (COVID-19) pandemic, according to preliminary estimates by the United Nations Conference on Trade and Development (UNCTAD).

In its latest investment trends monitor released on Monday, UNCTAD said that the Philippines bucked the trend as FDI flows went up 29% to $6.4 billion in 2020 from $5 billion in 2019. 

In contrast, global FDI plunged by 42% to around $859 billion last year, mostly due to investment declines among developed countries. FDI in Southeast Asia last year declined by 31% to $107 billion after flows to largest recipients Singapore and Indonesia shrank.

“FDI flows to developed countries fell drastically by 69% to values last seen almost 25 years ago… At an estimated $229 billion, inflows in developed economies were only one third of the low point after the global financial crisis in 2009 (at $714 billion),” UNCTAD said.

China was the largest FDI recipient with $163 billion in inflows, followed by the United States with $134 billion.

UNCTAD’s investment trends monitor estimates annual figures based on partial-year data.

The latest data from the Bangko Sentral ng Pilipinas showed FDI flows to the Philippines fell by around 10% to $5.255 billion in the first 10 months of 2020. The central bank set a target of $5.6 billion in total FDI for the year.

UnionBank of the Philippines Chief Economist Ruben Carlo O. Asuncion called UNCTAD’s assessment on Philippine FDI growth against an overall decline in Southeast Asia a “surprise.”

He noted in an e-mail that although he does not have the data, outsourcing investments in the Philippines grew during and after the Severe Acute Respiratory Syndrome (SARS) epidemic in 2003-2004.

“I suspect that this may be the case here. A lot of global firms might be finding themselves looking (at) how to cut cost and one way is to outsource,” he said.

European Chamber of Commerce of the Philippines President Nabil Francis said in a mobile message that the assessment demonstrates the country’s ability to attract investments amid the pandemic.

“Hence, we urge the Philippine government to keep the momentum going through the passage of key economic reforms,” he said, noting amendments to the Public Services Act, Foreign Investments Act, and Retail Trade Liberalization Act.

“The Philippines is among the world’s most restrictive countries to foreign direct investments. Foreign investment reacts positively to liberalizing foreign restrictions.”

In the report, UNCTAD said the outlook for global FDI is expected to remain weak this year.

“Although the global economy is expected to initiate a hesitant and uneven recovery in 2021 and GDP growth, gross fixed capital formation and trade are projected to resume growth, investors are likely to remain cautious in committing capital to new overseas productive assets,” it said.

Potential increases in FDI flows, UNCTAD added, would be based on cross-border mergers and acquisitions — especially in healthcare and technology — instead of new investments on productive assets.

“Risks related to the latest wave of the pandemic, the pace of the rollout of vaccination programs and economic support packages, fragile macroeconomic situations in major emerging markets, and uncertainty about the global policy environment for investment will continue to affect FDI in 2021,” the report said.

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