More FDIs 6 months after credit upgrades

MANILA, Philippines – It will take several months for the historic investment grade ratings from international debt watchers Fitch Ratings and Standard & Poor’s to translate into more foreign direct investment inflows.

This was according to Trade Secretary Gregory Domingo who said on the sidelines of the Ease of Doing Business Summit on Friday, May 3, that the two credit ratings upgrades will translate into more job-generating investments in 2013 and 2014.

“The FDI decision circle is about 6 to 18 months, so you will see the Fitch Ratings announcement making an impact later this year and the S&P announcement making an impact up to next year,” he said.

Being in-charge of investment promotion for the country, Domingo hailed the investment grade ratings. “The upgrade is another testament to the support for the good governance of this administration. This will result in more investments…also foreign direct investment, which will be invested in factories and other projects,” he said.

On Thursday, May 2, the Philippines won its second investment grade from international credit rating firm Standard & Poor’s, which upgraded the countrys’ credit rating to BBB- from BB+. This comes hot on the heels of its first investment grade by Fitch Ratings, which raised the Philippines’ credit rating to BBB- on March 27.

“The upgrade on the Philippines reflects a strengthening external profile, moderating inflation, and the government’s declining reliance on foreign currency debt,” S&P credit analyst Agost Benard said in a statement following the announcement of the upgrade.

More interest in Philippines

Domingo said that judging by the number of visits they have already received from foreign companies interested in investing in the Philippines, they will likely exceed the record FDIs set last year.

“The expectation is that it will be bigger than last year. I would say 10% would be a safe target,” said Domingo. 

According to the Bangko Sentral ng Pilipinas (BSP), FDI investments in 2012 reached $2.033 billion, up 9.8% from the $1.852 billion in 2011. 

Domingo said the growth drivers have been “a good economy, good workforce — a young population which will be a supply of workforce for the next decade or two — and improving governance.”

“We still have many problems but we’ve solved many as well, and we continue to progress through to better things,” he added.

More Europeans eyeing Philippines

In terms of foreign investment, Domingo said Japan is the country’s biggest trading partner.

“Right now, Japan is our biggest trading partner and biggest investment source and it will continue to be that way for the next few years,” said Domingo. 

“When we went to Japan in March you could see already the overwhelming response. I’ve given several investment seminars in Tokyo over the years but the last one was the biggest attended — over 500 people,” he added.

He noted, however, that more investments from European companies may be in the offing.

“Europe is opening up to the Philippines now. Before, there was little interest [from] Europe. Now we should expect to see more European firms. That’s why we plan to do a European road show sometime this year,” he said. 

Domingo noted the trend of increasingly steady increase in FDIs since the start of the Aquino administration.

“We’ve seen the investments come in starting early 201. About 6 months after the start of this administration, we started to see increasing interest in investment,” said Domingo. 

According to Guillermo Luz, co-chairman of the National Competitiveness Council, the credit upgrade will have an impact on the ratings and rankings of the World Economic Forum Global Competitiveness Index but not on the Ease of Doing Business Report, which has no section on credit ratings. – Rapper.com