Reforms push Phl as capital magnet

The Philippines has been projected as the second biggest draw for global investors this year, next to Cambodia, the annual FDI (foreign direct investments) Standouts Watchlist showed.

The study, which assessed the macroeconomic and foreign direct investment trajectories of the world’s top 50 FDI destinations using data from the International Monetary Fund (IMF) and foreign investment monitor fDi Markets identified countries with a strong macroeconomic and FDI momentum as the world continues to grapple with a patchy post-Covid recovery.

The study cited the IMF’s projection that the gross domestic product (GDP) will grow to 5.9 percent from 5.3 percent 5.9 percent, with an inflation forecast of a moderate 3.2 percent in 2024.

Both public and private investment have played a key role in shoring up growth, “with much of new president Ferdinand “Bongbong” Marcos Jr.’s reform agenda falling on liberalizing investment since he took office in 2022,” the report indicated.

It added that from an FDI perspective, the opening of the renewable energy sector to foreign investors had effected major change.

Historically, foreign ownership was capped at 40 percent in key sectors, including energy, telecommunications, airlines and shipping. Before FDI restrictions were scrapped in 2022, the Organization of Economic Cooperation and Development group of developed nations had ranked the country the third-most restrictive to FDI worldwide.

It added that the impact of the reform was immediate.

Major foreign companies the likes of Danish Copenhagen Infrastructure Partners and German WPD pledged as much as $13.9 billion in new wind and solar power projects across the country in the first nine months of 2023. That is about five times more than the country’s second-best performance in 2007, think tank fDi Markets figures showed.

Although not yet fully reflected in FDI data, Chinese companies have also made major pledges around the development of the local renewable energy sector.

The report showed Asia has performed well in this year’s watchlist, featuring six countries in the top 10: Cambodia in the lead, the Philippines in second, Iraq in fourth, Kazakhstan in sixth, Azerbaijan in seventh and India in 10th. Just three African countries made the top 10: Kenya in third, Namibia in fifth and Morocco in eighth. Serbia was the only country outside Asia and Africa to make it into the top 10, securing ninth place.

Cambodia’s turn to shine

With GDP growth forecasted at 6.1 percent in 2024, up from 5.6 percent in 2023, the IMF expects Cambodia to be the fastest-growing economy in Southeast Asia next year, with inflation contained at 3 percent in both 2023 and 2024. Structural and cyclical factors have contributed to the country’s economic performance.

The country has strengthened its trade relationship via free trade agreements with China and South Korea, both of which came into effect in 2022.

It is also a member of the Association of Southeast Asian Nations, and the Regional Comprehensive Economic Partnership, and has preferential access to the EU market, although it was partially withdrawn by the bloc over human rights concerns in 2020.

At the same time, the Southeast Asian economy has been benefiting from a recovery in tourism since China started lifting its Covid-related travel restrictions earlier in 2023.

According to figures from the UN World Tourism Organization, tourism arrivals increased eight-fold in the first quarter of 2023 from the year before, although they remained 31 percent lower than in the first quarter of 2019.

“The recovery in FDI followed a similar trajectory. After all but vanishing in 2021, greenfield FDI has bounced back, reaching $2 billion spread over 20 projects in the first nine months of 2023,” according to fDi Markets figures.

China accounted for more than two-thirds of the country’s greenfield FDI capital expenditure since 2021, with Chinese companies active across the board, from the construction and operation of a new $1.35bn expressway to manufacturing projects in tires and solar panels.