foreign investments in the Philippines

[ANALYSIS] Are the foreign trips really worth it?

Winnie Monsod

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[ANALYSIS] Are the foreign trips really worth it?
Based on my experience as NEDA chief, the FDIs (pledged by the private sector or state-owned companies of the host country) were either already in the making or already a done deal, and just brought together to coincide with the visits. Thus, even without the visit, they would have been pledged.

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A total of P3.48 trillion, or $62.926 billion (exchange rate at P55.30=$1).  

That is what the nine presidential trips over the past eight months produced in foreign direct investment (FDI) pledges (spread among 116 projects) from the nine countries that he visited. Or so says the report of Trade and Industry Secretary Fred Pascual, to his principal, and to the Filipino people.

Methinks the report aims, among other things, to silence the criticism Marcos Jr has received about his frequent travels. It implies that everytime he sets foot on foreign soil, he gets, on the average, $7 billion in FDI pledges from it. The trips, in other words were worth it.  So, shut up, critics.  

However, it also has an unintended consequence: Why go through all the effort of changing the Constitution to remove the economic restrictions on FDI?  All the country needs to get FDI  is to send the President abroad, and voila!, we have all we want.  So, shut up, ChaCha advocates.

But let’s look more closely at the numbers.

Discrepancies in the reports

With respect to the amounts involved per country visited:

One notices discrepancies between the pledges from Belgium and China as reported by the Palace and by the DTI Secretary. When President Ferdinand Marcos Jr. returned from Belgium and China, he (or the Palace) reported pledges of P9.8 billion ($177 million at P55.31=$1) and $22.8 billion respectively. The DTI secretary however, reported pledges of P121.68 billion ($2.20 billion) from Belgium and $24.239 billion from China. There’s a discrepancy of $2 billion with respect to FDI pledges from Belgium, and $1.4 billion from China. Who is correct? Or does the executive consider $3.4 billion or P188 billion loose change? 

With respect to the $63 billion FDI pledges as a whole: 

First, does that represent a humongous figure, or just a tiny amount, or something in between?  Answer: It is humongous. For context: According to the 2022 World Investment Report, the FDI inflows into the ASEAN-5 (Indonesia, Malaysia, Philippines, Thailand and Vietnam) in 2021 totalled $69 billion, with $10.5 billion going to the Philippines. From Jan. to Nov. 2022, according to the DTI, the Philippines had received $8.4 billion in FDI inflows. If the Philippines is to match in 2022 the FDI inflows it received in 2021, the FDI inflows for the month of December 2022 should be $2.1 billion.

Have your eyes glazed over, Reader. What the above figures show is (1) That indeed, $63 billion is a humongous amount, the implication being that (2) There is no way that all of that amount will flow into the Philippines in 2023, because that is almost as much as the total inflow into the ASEAN-5 in 2021.   (3) BTW, the Philippines receives the least amount of FDI inflows among the ASEAN-5 (this has been true for at least 30 years). And (4) Should the FDI inflows last December exceed $2.1 billion, the excess can arguably be assumed to be the result of the President’s trips. So let’s wait for that data from the Bangko Sentral ng Pilipinas.

Second, was all of that pledged $63 billion in FDI a direct offshoot of the President’s trips? Answer: No. Based on my experience as National Economic and Development Authority (NEDA) director general, the FDI (pledged by the private sector or state-owned companies of the host country) were either already in the making or already a done deal, and just brought together to coincide with the visits.

Thus, even without the visit, they would have been pledged. What I would consider to be direct offshoots of the President’s visit are the projects covered by Letters of Intent (LOIs) or Memoranda of Understanding (MOU). But unless we have more information (the DTI website was not forthcoming) on the number of projects and the amounts involved covered by these LOIs and MOUs, we cannot give a more precise figure on what President Marcos’s presence may have contributed.

Third, are we sure that all of the $63 billion pledged will actually flow in? Answer: No. The more investment pledges that are covered by LOIs and MOUs, the iffier they are, with the LOIs being more iffy than the MOUs. Why are they iffy? Simply because, as is the general understanding, those documents are not legally binding. They are just words, with the MOUs a little more substantial than the LOIs. The signatories are not constrained to put their money where their mouths are.

The iffiness of the investment pledges are also influenced by the country of the investor. Only recall, Reader, that when former president Rodrigo Duterte made his trip to China, he reported that he got $23 billion worth of investment and soft loans. If I remember correctly, only about 10-13% of that pledged amount actually came in. It would be interesting to find out how much of the current package from the Marcos trip is comprised of the old, unfulfilled Duterte pledges.

Finally, if we definitely know that the entire $63 billion is not flowing in this year, can we at least have an idea of how much will? No answer. That question was asked by CNN TV host Rico Hizon of Trade Secretary Pascual. Rico asked other related questions, like “How many Filipinos will get jobs this year as a result of the presidential visits?” This, to give his viewers an idea of the concrete (as opposed to the hoopla) benefits to the Filipinos this year of the presidential trips.

Unfortunately, no definite answer was forthcoming from the secretary. 

But it is safe to say that the investments that were planned by foreign investors who are already in the Philippines (e.g., Procter and Gamble, Unilever, Toyota) and were included in the $63 billion package to fatten it up, will definitely materialize. But this is a two-edged sword, because it means that even without the President’s trip, the FDI would have come in. Sigh! –

Solita “Winnie” Monsod was the first National Economic and Development Authority secretary appointed after the fall of the Marcos dictatorship in 1986. She is a professor emerita at the UP School of Economics where she taught starting 1983. She finished her degree in economics in UP and obtained her masters in economics at the University of Pennsylvania. She is a board director of Rappler Inc.

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