THE BUSINESS environment has continuously improved under the Duterte administration, and this is evident in the more than 50-percent increase in foreign direct investments that flowed into the country in the first seven months of 2018.
Aside from the improving investment figure, there are other factors pointing to better days ahead, such as the rebound of the peso and the local stocks in recent weeks. The inflation rate, I believe, is expected to taper off sooner or later, as rice prices subside following the entry of more supplies into the market.
Both bank loans and deposits are increasing at double-digit rates, which are common among rapidly growing economies.
No less than the World Economic Forum took notice of the improved business environment in the country. In WEF’s Global Competitiveness Report 2018, the Philippines ranked 56th out of 140 economies worldwide and the fifth most competitive among Asean members.
It was an improvement by 12 places from the country’s 68th spot last year, although different metrics were used in the latest survey.
Of the 12 major pillars assessed by the WEF, the Philippines ranked high in the market and innovation ecosystem components, including market size (32nd), labor market (36th), financial system (39th) and business dynamism (39th).
The World Bank separately issued its own report on 2019 Ease of Doing Business, but the Department of Finance and the Department of Trade and Industry quickly protested the country’s drop in ranking by 11 notches from 113th in 2018 to 124th in 2019.
Our two government agencies noted the grossly inaccurate and understated findings in the Getting Credit indicator of the World Bank report.
In its protest letter, the DoF said the ranking was regrettable because of the significant headway made by the Philippines in other indicators. “The Philippines registered a +1.36 increase in the Ease of Doing Business score at 57.68, yet received a lower ranking,” the agency said.
While these global reports are important in providing international benchmark and comparison, what is more valuable is the actual flow of foreign investments. Based on data from the Bangko Sentral ng Pilipinas, net inflows of FDIs climbed 52 percent in the first seven months of 2018 to $6.7 billion from $4.4 billion in the same period last year.
Net investments in July surged to $914 million from $344 million a year ago, reflecting “the continued positive investor sentiment on the Philippine economy on the back of strong macroeconomic fundamentals and growth prospects,” according to the Bangko Sentral.
With the latest figures, Budget Secretary Benjamin Diokno, a leading economist, believes the full-year FDIs this year would top the record $10-billion net inflow recorded in 2017. “The global FDI is declining, but the Philippines’ FDI is increasing,” Diokno was quoted as saying.
Prospects for the coming years are even better, after President Duterte signed Executive Order No. 65 that promulgated the Eleventh Regular Foreign Investment Negative List, or RFINL.
Economic Planning Secretary Ernesto Pernia, another noted economist, said the latest issuance would help raise the country’s competitiveness. This is because the 11th RFINL relaxes some of the restrictions to the entry of foreign capital.
In particular, five investment areas/activities will open to 100-percent foreign participation. These include Internet businesses; teaching at higher education; training centers engaged in short-term high level skills development; adjustment companies, lending companies, financing companies and investment houses; and wellness centers.
It will also allow greater foreign participation in construction to support the government’s infrastructure program.
The promulgation of 11th RFINL complements other measures that are designed to enhance the investment climate in the country. These include the implementation of the Anti-Red Tape Act and the Ease of Doing Business Act of 2018.
The peso has recently shown resilience, as it strengthened to 53.5 to the dollar. The stock market rebounded as well, after the Bangko Sentral made known its resolve to put consumer prices under control by raising interest rates.
All these positive indicators make us optimistic that we will continue to enjoy robust economic growth in the coming years.
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This piece first came out in Business Mirror on Nov. 13, 2018 under the column “The Entrepreneur.” For comments/feedback e-mail to: mbv.secretariat@gmail.com or visitwww.mannyvillar.com.ph./PN
