Reforms lure foreign investments into banking, manufacturing

MANILA, Philippines – Economic reforms undertaken by the government on banking and manufacturing sectors are now yielding positive results by attracting more foreign direct investments (FDI) into the sectors, the chief economist of the Department of Finance (DOF) said.

“FDI flows to sectors that undergo economic reform,” Finance Undersecretary Gil Beltran said in a recent economic bulletin.

Specifically, Republic Act 10641 that allowed more foreign banks to operate in the country and an ongoing manufacturing blueprint both helped double FDI to $587 million in January.

Broken down, equity investments – or those which are funneled by parent companies to subsidiaries in the country – accounted for the bulk at $330 million.

A net inflow means more FDI entered than left during a specific period. If sustained, FDI is considered a job-generating investment.

“Liberalized foreign bank entry and manufacturing resurgence programs were the spark that generated significant response from investors in 2015 and the first month of 2016,” Beltran said.

RA 10641 allowed the operation of more than 10 foreign banks in the Philippines under the previous law. So far, the central bank said six other lenders were approved to operate in the country.

This, in turn, generated a surge to $189.39 million in financial and insurance sector equity FDI from $2.18 million in January, Beltran said.

The ongoing 2014-2025 Manufacturing Resurgence Program, meanwhile, increased the sector’s FDI by more than 4,600 percent in January.

Equity FDI placements on factories rose to $13.27 million from just $280,000, central bank data showed.

“For the sectors to benefit from FDI, economic reforms should continue and the competitive edge of the Philippines in services should be exploited to the fullest,” the DOF official said.

Other economic sectors should also undergo reforms, he said, particularly the information and communication technology (ICT) segment that attracted $4.74 million.

“The competitive position of the Philippines in technology-enabled services is also evident in the 66,659 percent in FDI...,” Beltran said.