Olongapo Telecom & Information Technology

Saturday, September 19, 2009

ICT rebound slows down foreign direct investment decline

Total approved foreign direct investments (FDIs) in April-June declined for the third straight quarter but at a slower rate due to a rebound in the information and communications technology (ICT) sector.

"After four quarters of continuous decline, committed investments intended for the ICT industry rebounded, growing by 220.9% from P2 billion a year ago to P6.5 billion in [the second quarter of] 2009," according to the second quarter FDI Quarterly Report released on Friday by the National Statistical Coordination Board (NSCB).

The ICT sector’s contribution has tempered the quarter-on-quarter FDI decline, reflecting an economic recovery although at a slow pace.

"Although [the second quarter performance] marks the third consecutive quarter of declines in approved FDI, the decline is lower than the declines registered in the previous two quarters, an indication that the global crisis may be over," NSCB Secretary-General Romulo A. Virola said in a statement accompanying the report.

Second-quarter FDIs approved by four investment promotion agencies posted a 73% drop to P19.9 billion from P73.9 billion year-on-year, the report said.

The FDI report covered four investment promotion agencies — Board of Investments (BoI), Clark Development Corp. (CDC), Philippine Economic Zone Authority (PEZA) and Subic Bay Metropolitan Authority (SBMA).

Earlier NSCB reports showed total approved FDIs in the first quarter reached its lowest level in 13 years at P4 billion, declining by 80.9% year-on-year This is a percentage point lower than the fourth quarter 2008 drop of 79.2% to P21.4 billion.

The pick-up in FDIs will continue "considering that the global recession is easing," Bureau of Investments (BoI) Managing Head Elmer C. Hernandez said in a text message on Friday.

For his part, BoI Executive Director Efren V. Leaño said in a separate interview on Friday "there’s a big probability of a contraction" of investment pledges approved by the BoI and PEZA compared to the Trade department projection of up to 3.7% growth.

"But based on the interest we received from missions, it will be better in 2010 and 2011," he added.

The upbeat outlook, however, defied the United Nations Conference on Trade and Development’s World Investment Report released on Thursday that predicted FDI flows to Southeast Asian countries will only recover by 2011.

On a per country basis, Korea led all other countries, committing about 25.6% of total FDI applications or P5.1 billion for the second quarter. Hong Kong and Japan followed at 19% and 12.8%, respectively. It was the first time since the third quarter of 2000 that Hong Kong has landed in the top three countries with P3.8 billion in pledges.

"Hong Kong investments were mostly intended to fund projects in finance and real estate industry," the quarterly report noted.

Per sector, finance and real estate posted the highest FDIs as commitments quadrupled to P7.6 billion in the second quarter from P1.9 billion in 2008. Private services was second at P6.6 billion, down 53.2% from last year.

The report added that a total of 29,006 jobs are expected to be generated from the FDIs approved in April-June, over half of which will come from private services.

During the period, investment promotion agency PEZA contributed the lion’s share at 63.6% equivalent to P12.7 billion worth of commitments, followed by SBMA (13.3%), CDC (12.3%) and BoI (10.8%).

CDC recorded the highest growth in FDI approvals with 38.8% while BoI registered the largest decline at 95.9 percent, the report said. — M. P. T Jamias

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