in 2020, but down 24.6

Foreign direct investments yield net infl ow of $6.5B in 2020, but down 24.6% Foreign direct investments yield net inflow of $6.5B in 2020, but down 24.6%

MANILA (Mabuhay) — Foreign direct investments (FDI) in the Philippines yielded a net inflow in 2020, but posted a double-digit decline from a year earlier due to the economic impact of the COVID-19 pandemic, data released by the Bangko Sentral ng Pilipinas (BSP) on Wednesday showed.

BSP bank data showed that FDI —investments by foreign firms and individuals in the Philippines— stood at a net inflow of $6.542 billion, down 24.6% from $8.671-billion net inflow in 2019.

An FDI net inflow indicates that non-residents’ investments that entered (inflow) the country exceeded those that exited (outflow) or were withdrawn.

“The disruptive impact of the pandemic on global supply chains and the weak business outlook adversely affected investor decisions in 2020,” the central bank said.

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said that the lower FDI net inflow is “in response to lower demand conditions due to COVID-19, amid cost-cutting/attrition measures by global companies/foreign investors to remain competitive.”

“Some foreign investors remained tentative/on a wait-and-see attitude before the possible signing of the CREATE Bill into law by President [Rodrigo] Duterte any time soon,” Ricafort added.

The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which was recently ratified by Congress, is awaiting Duterte’s signature.

The measure seeks to lower the Philippines’ corporate income tax (CIT) rate from 30% to 25% and rationalize the country’s investment incentives, making them more competitive and transparent, time-bound, targeted, and performance-based.

The law also provides businesses with economic stimulus measures that will help them recover from the COVID-19 pandemic.

In particular, the BSP said foreigners’ net investments in debt instruments contracted by 22% to $4.1 billion in 2020 from $5.2 billion in 2019.

Likewise, non-residents’ net equity capital investments dropped by 35.7% to $1.5 billion last year from $2.3 billion year-on-year.

The BSP said bulk of the equity capital placements during the period came from Japan, the Netherlands, the United States, and Singapore.

Foreigner’s capital infusions were directed mainly to manufacturing, real estate, and financial and insurance industries.

Reinvestment of earnings, meanwhile, declined by 13.6% to $978 million in 2020 from $1.1 billion a year earlier.

“For the coming months, FDIs could pick up, alongside with the expected further re-opening of the economy, as well as the possible signing into law of the CREATE that will outrightly reduce corporate income tax rate to 25% (from 30%) and provide greater certainty on investment incentives, thereby would make some foreign investors on the sidelines to become more decisive and bring in more FDIs into the country,” Ricafort said.

In December alone, FDI registered a $509-million net inflow, 62.6% lower than the $1.4-billion net inflow recorded in December 2019.

“The year-on-year decline in FDI in December 2020 was due mainly to base effects given significantly large inflows from net investments in equity capital and debt instruments in December 2019,” the BSP said. (MNS)

NEDA seeks passage of GUIDE bill before June

MANILA (Mabuhay) — The National Economic Development Authority (NEDA) on Thursday called for the passage of the measure seeking to provide financial aid to distressed enterprises affected by the COVID-19 pandemic before June this year.

NEDA Assistant Secretary Carlo Abad Santos made the appeal as the Senate banks committee tackled the proposed Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) bill.

According to Abad Santos, the GUIDE bill is among the 12 priority measures of the Legislative-Executive Development Advisory Council for approval by the end of this year. "We hope for its swift passage before June this year. Along with other members of the economic team, we are here to express our full support for GUIDE and to request the Senate to facilitate its speedy approval," he added.

Under the proposed measure, the financial assistance will be given through programs and initiatives that will be enforced by the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) to address liquidity or solvency problems of micro, small and medium enterprises (MSMEs) and strategically important industries, encourage their continued operations, and maintain employment levels.

One key provision of the measure is the expansion of loan assistance programs, rediscounting and other credit accommodation facilities of LBP, DBP, small business corporation and Agriculture Credit Policy Council.

The targeted sectors of LBP include players engaged in activities in the agribusiness value chain and for DBP, it will give assistance to eligible MSMEs engaged in infrastructure, services, service industry, and/or manufacturing business.

BSP support

Bangko Sentral ng Pilipinas Governor Benjamin Diokno likewise expressed full support to the passage of the GUIDE bill. "When enacted, the GUIDE bill will boost the capacity of LBP and DBP to support our MSMEs through expanded lending activities, thereby ensuring the availability of credit to this sector," he said. "This bill will supplement the financial assistance to MSMEs that this Congress provided through the Bayanihan laws," he added.

National Treasurer Rosalia de Leon likewise backed the approval of the measure, noting the importance of MSMEs and strategically important companies in the country's economy. "We think that GUIDE is "We think that GUIDE is an efficient and effective method to support the economic recovery. The initial funding required will go a long way in helping people tide this pandemic," she said.

The House of Representatives has already sentatives has already NEDA ASSISTANT approved its version of the SECRETARY CARLO measure last month. (MNS) (MNS) ABAD SANTOS