Improving Investment Climate

Improving the investment climate in the Philippines is one task that a chief executive must do to boost the economy. President Ferdinand Marcos Jr. and our lawmakers did just that. Mr. Marcos’s recent successful state visits are proof that the Philippines is ready to compete with our Asian neighbors and get a bigger slice of the investment pie.

Local and foreign investments lead to higher income and more purchasing power for Filipinos and the overall economy. Attracting more investments would help us lift our exports and narrow the trade deficit, generate more jobs, develop infrastructure, strengthen the energy and water sectors and sustain our economic growth in the long term.

We face a widening trade deficit that could be a source of instability in our balance of payments position and foreign exchange rate. Our merchandise trade deficit reached a record $58.24 billion in 2022, as imports grew 17.4 percent to $137.22 billion, faster than the 5.7-percent increase in exports to $78.98 billion.

Plugging the gap could not be done overnight. As a middle-income economy with a population of over 110 million, we have growing requirements for food, fuel, raw materials, capital equipment and consumer goods, most of which are imported. At the same time, we could not afford to keep importing all these items, lest we deplete our foreign exchange reserves and hurt our local currency.

The Philippines imported nearly $24 billion worth of petroleum products last year and another $11 billion worth of vehicles and transport equipment, per the data of the Philippine Statistics Authority. We incurred a trade deficit of $17.25 billion with China alone.

What we need is technology transfer that will enable us to produce these items locally. In other words, we need more investors in the food, oil and energy, industrial, automotive, manufacturing and services.

Many of our Southeast Asian neighbors like Singapore, Malaysia, Thailand, Indonesia and recently Vietnam have drawn more investments than the Philippines.

Indonesia, for example, emerged as a preferred assembly hub for Japanese automotive companies and now exports a lot of vehicles to the Philippines. We incurred a trade deficit of $12.5 billion with Indonesia in 2022.

This is why I support the policies of President Marcos as well as the economic reforms passed by Congress to attract more foreign capital to the Philippines. I hope our investment promotion agencies will pursue the investment leads from President Marcos’s state and working visits overseas.

Several agencies reported encouraging numbers recently. The Philippine Economic Zone Authority registered a 54-percent increase in investments approvals to P12.537 billion in the first quarter of 2023 from a year earlier. Once realized, these investment projects are expected to add $616.585 million in exports and create 5,236 direct jobs. 

The agency also expects more investments in the areas of vaccine and life sciences sector, electric vehicle battery technology, motorcycle manufacturing, organic fertilizers and pesticides, healthcare and LNG facilities, on top of semiconductor manufacturing and IT services.

Meanwhile, the Subic Bay Metropolitan Authority approved P50.4 billion in committed investments in 2022, up 181 percent from P17.29 billion in 2021, thanks to its aggressive marketing strategy. As a result, employment at the Subic Bay Freeport grew 5.2 percent to 149,681 workers in 2022 from 142,177 in 2021 on increasing number of locators and projects.

The Board of Investments, the lead investment promotion agency of the Department of Trade and Industry, upgraded its target
investment approvals in 2023 to P1.5 trillion, as it pursues various investment leads.

The agency received investment pledges of more than P400 billion in the first six weeks of 2023 and is following up on potential investment leads of P344 billion.

Other promising areas for investments in the country, per the DTI, are digital startups and hyper-scale computing firms. The DTI is actively promoting the Philippines as an ideal destination for startups and hyper-scalers or big data centers in the region.

DTI Secretary Alfredo Pascual describes the Philippines as one of the emerging ecosystems across the region that offers a lot of growth potential, being home to a young and tech-savvy population. The Philippines has a large pool of talented and skilled workers that support a world-class IT and business process management sector that delivered over $30 billion in service exports in 2022.

If we could replicate the success of the IT-BPM sector in other segments of the economy, we would definitely raise our exports, while generating jobs and livelihood opportunities for millions of young Filipinos.

We have recently relaxed restrictions on foreign capital and passed game-changing reforms. Our Congress reduced the corporate income tax to 20 percent under the Corporate Recovery and Tax Incentives for Enterprises Law.

The government lifted the foreign ownership restrictions on renewable energy generation projects in December 2022. Foreign companies can now own up to 100 percent of renewable energy projects in solar, wind and tidal energy.

With the faster pace of investments here and a more business-friendly environment, I see the Philippines achieving a higher economic standing in the coming quarters and years. All we have to do is believe in our potential as a nation.