The government is looking at raising the maximum stake of foreign investors in a dozen sectors and business activities to shore up foreign direct investment (FDI) amid a year-to-date drop, the country’s chief economist said Wednesday.
Socioeconomic Planning Secretary Ernesto M. Pernia told the Senate finance committee during the hearing on the proposed 2018 budget of state planning agency National Economic and Development Authority (Neda) that the decline in FDI so far this year was possibly due to a “waning of the honeymoon period of the administration.”
“In the beginning there was so much euphoria, but it’s waning,” said Pernia, who heads Neda.
The latest Bangko Sentral ng Pilipinas (BSP) data showed that the net inflow of job-creating FDI declined 14 percent year-on-year to $3.598 billion in the first half.
“I think the fundamental problem we have compared with our neighbors in the Asean economic community is that we are lagging behind in how we liberalized our FINL,” Pernia told senators, referring to the foreign investment negative list.
Every two years, the government releases the FINL, which lists down sectors where foreign investors have only limited participation.
The 10th FINL was issued by former president Benigno Simeon “Noynoy” Aquino III in 2015 under Executive Order No. 184, which had practically kept intact the list of activities and sectors restricted to foreign equity and participation as provided for in the ninth regular FINL.
“We have a FINL that is pretty long if we compare with our neighbors. It’s one of the major reasons why we are not getting enough foreign investments,” Pernia said.
Pernia later told reporters that President Rodrigo Duterte himself was “quite keen on reducing restrictions.”
The Neda chief said they were eyeing to further liberalize a dozen sectors under the FINL, although the list was still being finalized.
Specifically, Pernia said they wanted to reduce the cap on professional services. Neda officials had said they were also eyeing up to 100-percent foreign ownership in contractors as well as investment houses.
“We almost completed our review of the FINL to allow raising of foreign equity to 100 percent. We’re disseminating the list to different agencies before submitting it to the president for Neda Board approval,” Pernia said.
According to Pernia, the deadline for feedback from other government agencies was on September 25, so that Neda can submit the proposed 11th FINL to President Duterte by the end of this month.
“If we’re successful in doing that [reducing the FINL], we can be successful in attracting more FDI,” according to Pernia.