Philippine Statistics Authority: Q3 Approved Foreign Investment Pledges Up From Q3 of 2022

The third quarter of 2023 saw an increase in approved foreign investment pledges at PHP 27.3 billion, compared to third quarter of 2022 approved pledges at PHP 13.05 billion. According to the Philippine Statistics Authority, this figure translates to a 109 percent increase year-on-year. However, compared to the approved pledges recorded in the second quarter of 2023, this is a 54 percent decrease as last quarter’s pledges amounted to PHP 59.09 billion.

Most of the approved investment pledges came from Singapore at PHP 13.04 billion, followed by Taiwan at PHP 3.63 billion, and the United Kingdom at PHP 3.63 billion. Among the IPAs, the Philippine Economic Zone Authority accounted for the most approved third quarter foreign investment pledges with PHP 18.33 billion, followed by the Subic Bay Metropolitan Authority with PHP 4.11 billion, Board of Investments with PHP 3.74 billion, Clark Development Corp. with PHP 968.17 million, Zamboanga City Special Economic Zone Authority with PHP 112.31 million, Authority of the Freeport Area of Bataan with PHP 35.25 million, and Cagayan Economic Zone Authority with PHP 4.97 million.

According to Oikonomia Advisory and Research Inc. President and Chief Economist John Paolo Rivera, increased foreign investments “may be a result of relatively stronger economy compared to neighboring economies, albeit high inflation and interest rates”. Moreover, Rivera also noted that it may be an effect of the liberal reforms that the government has enacted such as the Public Service Act, Retail Trade Liberalization Act, and Foreign Investments Act.

However, PSA notes that these “approved” investment pledges have yet to turn into actual foreign investments. While there is an increase in pledges, real investment in the recently released third quarter GDP declined. According to Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion, “it’s good that foreign investment pledges grew in the third quarter year on year. Nonetheless, we still saw a decline in real investment from the last third quarter GDP print release. We still are on the lookout for actualization of these pledges in the immediate future and help contribute to GDP growth soon” (https://www.bworldonline.com/top-stories/2023/11/15/557473/foreign-investment-pledges-surge-in-q3/).

Last February 2023, in light of the foreign investment deals between the Philippines and Japan, Department of Trade and Industry (DTI) Secretary Alfredo Pascual remarked that the Philippine government has yet to do its part in making foreign investment pledges ‘real.’ Pascual noted the challenge in materializing these investment pledges as “sometimes, in the past that’s the bottleneck – the compliance with the regulatory requirements”.

Nonetheless, China Banking Corp. Chief Economist Domini S. Velasquez said that “there is a potential for foreign investments to improve in the next few months, as third-quarter GDP growth showed the economy’s resilience”. She adds, “we also expect economic conditions to become more favorable for investments, especially next year. The jump in public infrastructure this year, and planned infrastructure spending in the medium term, will likely provide a ‘crowding in’ environment for investors”.

PSA notes that Approved Foreign Investment Pledges do not reliably translate into actual foreign investment, but Approved Foreign Investment is still potentially a leading indicator for Foreign Direct Investment. FDI figures in the Philippines can be relatively erratic quarter to quarter, with singularly large investments causing peaks. Net FDI has been up and down since 2016, ranging between USD 6.8 and USD 11.9 billion per year.