Winning Investors’ Confidence
One factor that keeps me hopeful about the Philippine economic growth prospects is the strong interest shown by foreign and local companies in investing in the country, either for expansion projects or new facilities.
New investments, in particular, have multiplier effects on the economy as they involve the opening of factories that also benefit the property sector. A new project will generate jobs in the construction, real estate, transportation and logistics, services and eventually manufacturing industries.
This will also require training and facilitate technology or knowledge transfer to upgrade the skills of the Filipino talents. The more factories or facilities we have, the more cost-competitive our domestic industries will become, resulting in a stronger value chain that will lure more investments.
Other Southeast Asian countries such as Thailand and Indonesia have developed their automotive sectors by opening their markets to Japanese car assemblers. One company came after another, leading to the further improvement of infrastructure and logistics systems that made the two nations ideal as manufacturing sites.
The same concept is behind the development of economic and industrial zones in the Philippines, where locators do not have to invest in their own infrastructure because the system is already in place after the government built it for them.
The Philippines has its own share of success in developing the information technology and business process management sector (IT-BPM), which now contributes over $30 billion in service exports annually. If we could replicate the growth of IT-BPM in the manufacturing sector, we can certainly achieve a faster economic growth.
This is why I believe that the multi-billion investments reported by the government’s main investment promotion agencies will help sustain our high-growth trajectory in the coming years. Manufacturing and agriculture could help us achieve a gross domestic product growth of 7 percent to 8 percent annually over the next five years.
While actual foreign direct investments (FDIs) reported by the Bangko Sentral ng Pilipinas (BSP) slightly eased to $4.7 billion in the first seven months of 2023 from $5.5 billion in the same period last year, the more forward-looking investment pledges approved by the Board of Investments (BOI) and Philippine Economic Zone Authority are more encouraging.
The figures cited by the BOI and PEZA bode well for the next five years of the Marcos administration. Based on BOI data, investment commitments that obtained the agency’s approval climbed 102 percent in the first nine months of 2023 to P734 billion from P362 billion in the same period last year.
The foreign investment component of the BOI registrations grew 41 times to P427 billion from the previous year, per Department of Trade and Industry (DTI) Undersecretary and BOI Managing Director Ceferino Rodolfo.
Investments filed with the Philippine Economic Zone Authority (PEZA) increased 232 percent to P131.75 billion in the first 10 months of 2023 from P39.63 billion a year ago. The data shows that the President’s working visits to other countries resulted in actual investment registration and approvals, says Mr. Rodolfo.
European companies led foreign investors in expressing intent to build projects in the Philippines. German firms, for one, committed investments worth $427 billion for renewable projects (RE) in the country.
There is room for more investments in renewable energy as the Philippines transitions to clean power, with the goal of raising the RE share in the power generation mix to 35 percent by 2030 and 50 percent by 2040. Several European companies are keen on building new technologies, such as floating solar farms, offshore wind platforms and battery storage systems in the country. Others are offering nuclear technologies and tidal power solutions.
While we could not move away from fossil fuel and coal in an instant, the DOE laid out a transition plan where we could gradually reduce our dependence on these traditional fuel towards a greener future. But this requires massive investments, which fortunately some local and foreign companies are willing to do.
Undersecretary Rodolfo says foreign investors now view the Philippines as a good investment hub following the enactment of several policy reforms and the removal of the foreign equity restriction on renewable energy.
The DTI also reported that it logged P1.4 trillion in investment approvals since the start of the Marcos administration in July 2022. DTI Secretary Alfredo Pascual says most of these investments were registered in the first half of 2023.
I am confident that most, if not all of these investment commitments, will come to fruition within the six-year term of President Ferdinand Marcos Jr. These will translate into more jobs and livelihood opportunities for the Filipino labor force.