The country’s major investment promotion agencies (IPAs), the Board of Investments (BOI), and the Philippine Economic Zone Authority (PEZA), have exceeded target approvals in 2024, signaling robust economic prospects for the year ahead.

This year, the BOI targeted to attract PHP1.5 trillion worth of investments but ended with PHP1.62 trillion in pledges.

PEZA surpassed its PHP200-billion target approvals and closed the year with PHP214.18 billion in investments.

Compared to 2023 levels, the BOI approvals this year increased by 28 percent, while pledges in PEZA climbed by 22 percent.

“Actual investments above official targets are good signals on the further growth and recovery of the Philippine economy, with more businesses and industries recover towards or exceeding pre-pandemic levels,” Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort told the Philippine News Agency.

Ricafort said the government’s efforts to position the Philippines on the higher end of global supply chain, offering a cost-effective alternative to developed nations with lower operating costs and a skilled workforce, have been attracting investors, especially foreign nationals, to establish their businesses in the country.

“The country’s attractive economic fundamentals and demographics, with the world’s 12 largest population at more than 113 million and among the youngest in ASEAN at below 25 years old would make the country an attractive market for FDIs (foreign direct investments),” Ricafort added.

The BOI reported that foreign investment approvals this year amounted to PHP383.13 billion, mostly coming from Switzerland at PHP289.1 billion, followed by the Netherlands at PHP44.5 billion, Japan with PHP14.67 billion, and South Korea with PHP12.73 billion.

At PEZA, those projects with foreign capital reached PHP102.64 billion.

“Increased FDIs could have also partly been brought about by some realized investment commitments made for more than a year already during the various foreign trips of the administration,” the bank’s economist said.

This year, President Ferdinand R. Marcos Jr. had state visits in Vietnam, Czech Republic, and Brunei Darussalam; working visits in Germany, United States, Singapore, Laos, and United Arab Emirates; and an official visit in Australia.

As of June 2024 alone, the Department of Trade and Industry (DTI) reported that President Marcos Jr.’s foreign trips had led to a pipeline of investments amounting to USD76.6 billion or over PHP4 trillion.

Raising investor confidence

Moreover, Ricafort said the country’s positive credit ratings have contributed to shaping the Philippines’ image as an attractive investment destination.

The Philippines has two “A-“ credit ratings this year—one from Japan Credit Rating Agency (JCR) and the second from Rating and Investment Information (R&I).

S&P Global Ratings also raised the country’s credit outlook to “positive” from “stable,” while Fitch Ratings gave “BBB” and Moody’s gave “BAA2”.

“The continued affirmation of the country’s favorable credit ratings of one to three notches above the minimum investment grade over the past four years despite the Covid-19 pandemic, as highlighted by the credit rating upgrade on the Philippines by Japan’s R&I in August 2024 to A-, already the same as the rating given by Japan’s JCRA in 2020 despite the pandemic, the first A rating for the Philippines that could help boost confidence on the country by international investors and creditors, thereby would help attract more FDIs into the country,” Ricafort said.

CREATE MORE created more

At a press briefing this month, PEZA Director General Tereso Panga attributed the surge in project registrations in his agency in the last two months of 2024 to the signing of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE).

Investors have been in a wait-and-see mode before the signing of the CREATE MORE, which provides better fiscal incentives for economic activities listed in the Strategic Investment Priority Plan (SIPP).

Marcos signed the CREATE MORE into law on Nov. 11.

From January to October this year, PEZA’s investment pledges amounted to PHP124 billion, 6 percent lower than the PHP132 billion approvals in the same period in 2023.

But since the CREATE MORE was enacted into law, PEZA approvals made a turnaround, surpassing its PHP200-billion target as early as November at PHP202 billion and adding PHP13 billion more in December.

According to Panga, the CREATE MORE “gives more leverage in promoting the Philippines as the best investment hub in Southeast Asia.”

2025 targets

For 2025, PEZA is targeting to approve PHP250 billion investments, while the BOI is aiming to hit the PHP1.75 trillion mark.

Ricafort said these targets could be supported by the CREATE MORE and if policy rates continue to decline.

“There would be more FDIs into the country for the coming months due to CREATE MORE and also due to the expected further rate cuts by the Federal Reserve that could be matched by the Bangko Sentral ng Pilipinas that could reduce borrowing costs that would increase demand for loans, including those to finance FDIs into the country,” he said.

“However, offsetting risk factors for future FDI data would be possible more protectionist policies by a Trump presidency starting in 2025 that would discourage some US companies from investing and creating more jobs outside the US, as well as a potential trade war between the US and China and other countries that could slow down the world economy and global trade, which could be a potential drag on FDIs into the country,” he added.

Department of Trade and Industry (DTI) Undersecretary and BOI Managing Head Ceferino Rodolfo has another perspective on the planned tariff hikes by US President-elect Donald Trump.

“We believe that countries with which the US has a huge trade deficit—particularly those which worsened during the past four years—will be likely targets of additional US tariffs,” Rodolfo said.

According to the trade official, the Philippines’ trade deficit with the US only stood at USD4 billion in 2023, far smaller than the deficits the US faces with other Asian countries, including China (USD300 billion), Vietnam (USD109 billion), Japan (USD75 billion), South Korea (USD55 billion), India (USD47 billion), and Thailand (USD43 billion).

“With the Trump administration’s focus on reducing trade deficit, the Philippines can leverage the balanced and healthy Philippines-US trade, indicating a mutually beneficial trade relationship,” Rodolfo added.

Diversifying markets

Both the BOI and PEZA are also diversifying sources of foreign investments.

For PEZA, the IPA is looking into attracting more investments from the Middle East while also exploring Africa.

The DTI, on the other hand, is pursuing free trade agreements (FTAs) and Comprehensive Economic Partnership Agreements (CEPA) to strengthen investment and trade relations across the world.

On Dec. 31, the Philippines-South Korea FTA took effect.

In March, the Philippines and the European Union (EU) jointly announced that formal talks for an FTA will recommence.

A CEPA with the United Arab Emirates is also close to being finalized, and on Dec. 6, the country launched the same economic partnership deal with Chile, which will be the Philippines’ first CEPA with a South American nation. (PNA)