‘Gray list exit to boost investments into Philippines’

MANILA, Philippines — The International Monetary Fund (IMF) has urged the Philippines anew to continue its efforts to be taken out of the gray list of global dirty money watchdog Financial Action Task Force (FATF), as doing so will encourage more investments into the country.

Elif Arbatli Saxegaard, mission chief of the IMF’s recent staff visit to the Philippines, said the country should continue its progress in strengthening its anti-money laundering/combating the financing of terrorism (AML/CFT) framework.

“Completion of the Philippines’ Action Plan with the FATF is critical to improve the business environment and encourage foreign direct investments,” she said.

The Philippines was re-included in the gray list in June 2021 after a mutual evaluation report of the Asia-Pacific Group on money laundering (APG) showed that the country failed to address 18 deficiencies in AML/CFT controls.

Three years after its inclusion, the Philippines was still retained in the list of jurisdictions under increased monitoring in February as the country has yet to address the remaining strategic deficiencies.

Although significant progress has been made over the three-year period, the Philippines still needs to demonstrate the implementation of AML/CFT controls to mitigate risks associated with casino junkets, as well as increase investigations and prosecutions related to money laundering and terrorist financing.

Other concerns include the demonstration that the effective risk-based supervision of designated non-financial business and professions is occurring, streamlining access to beneficial ownership information and taking steps to ensure that beneficial ownership information is accurate and up-to-date.

The FATF is urging the Philippines to swiftly implement its action plan to address the strategic deficiencies as soon as possible as all deadlines have expired in January 2023.

According to Saxegaard, the IMF recognized the whole-of-government approach to get the Philippines out of the FATF gray list as this is not an easy process since it involves many government institutions.

“it’s a very huge undertaking and we commend the authorities’ efforts on this front. They are really committed and I think they are making significant progress,” she said.

“But our hope is that the Philippines gets off the list, building on this reform process that they’ve already initiated.”

She also noted that recent reforms to attract foreign investments and create a business-friendly environment could also diversify the economy and help develop the country’s growth potential.

“Implementation will be key, with careful selection of projects to reduce infrastructure gaps, building on the recently passed Public-Private Partnership Code,” she said.

“Additional efforts should center on upskilling the labor force, and enhancing the capacity of the local government units,” she added.

Central bank data showed that FDI inflow grew by 23.1 percent to $686 million in March from $557 million in the same month last year. This brought the first quarter FDI inflow to $2.97 billion, 42.1 percent higher than the $2.09 billion seen in the comparable period a year ago.

The BSP expects FDI net inflows at $9 billion this year and next.