Credit upgrade seen to boost approved investments

MANILA, Philippines - A 10 percent growth in investments “would be a safe target this year” considering the improving economic outlook for the country underpinned by two recent credit rating upgrades, Trade Secretary Gregory Domingo said yesterday.

The Standard & Poor’s Ratings Services (S&P) raised its credit rating for the Philippines to BBB- with a stable outlook, just over a month after Fitch Ratings gave the same rating last March 27.

Data from the National Statistical Coordination Board showed that total approved foreign investments for 2012 went up by 12 percent to P289.1 billion from the previous year’s P258.2 billion.

He said improving economic conditions are also seen to attract more investments.

“We have a good labor force...We have young population so we have good supply which can last for the next decade or two,” Domingo told reporters in a chance interview.

“We have improving good governance initiatives and business people like that,” he added.

But he said foreign direct investments (FDI) may take a longer time to take shape since companies don’t easily finalize investment decisions, unlike funds placed in portfolio investments such as stocks.

“(The decision cycle for FDIs) about six to 18 months so you’ll see the impact of the Fitch announcement maybe later this year and this S&P, later in the year up to next year,” he said.

In particular, Domingo said more investments are expected in business process outsourcing as well as in manufacturing. He said he is set to visit the United States in June to meet with potential investors. An investment roadshow in Europe later this year is also being worked out.

Business groups, meanwhile, have expressed elation at the latest credit rating upgrade for the country.

“This is good news...This will result in more confidence from investors,” Philippine Chamber of Commerce and Industry president Miguel Varela said in a telephone interview.

“As these ratings upgrades continue, the country can expect more investments that will spur job generation and inclusive growth,” Makati Business Club executive director Peter Perfecto said in a text message.

They noted though that the government should take more steps to help the country maximize the benefits of the recent credit ratings upgrades.

“The key is to translate these favorable ratings into stronger investor confidence, more domestic and foreign investment, specially on high value added and inclusive industries like manufacturing,” Federation of Philippine Industries director Roberto Batungbacal said in a text message.