Year 1 of Marcos Jr.: Trade and investments

Year 1 of Marcos Jr.: Trade and investments
July 18, 2023 | 12:01 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.
https://www.bworldonline.com/opinion/2023/07/18/534463/year-1-of-marcos-jr-trade-and-investments/

(3rd of 4 parts)

In this part 3 assessment of the year 1 economic performance of the Marcos Jr. administration, we will discuss trade and investment. Part 2 (July 11) discussed inflation and interest rates and Part 1 (July 4) discussed the budget deficit and unemployment.

Last week the Philippine economic team went on a US-Canada Non-Deal Roadshow (NDR) with a series of meetings with American investors, like US asset management firms and investors on July 10 at the Citi Headquarters in New York City. Then the 8th Philippine Economic Briefing (PEB) and first in Canada, held on July 13 in Toronto.

The Economic Team is composed of Budget Secretary Amenah F. Pangandaman, Finance Secretary Benjamin E. Diokno, NEDA Secretary Arsenio M. Balisacan, and Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. They presented the country’s macroeconomic performance and outlook, investment opportunities, and priority expenditures.

In 2022, Canada was the Philippines’ 20th largest trading partner with total trade (exports + imports) of $1.5 billion, and cash remittances of $1.2 billion from the nearly one million overseas Filipinos in Canada.

I checked the UN Conference on Trade and Development (UNCTAD) World Investment Report (WIR) 2023, on what countries are the largest net exporters of capital. Then I checked the BSP data on sources of FDI in the Philippines, whether these big exporters of capital have poured investments in the country.

In the table below, I grouped the countries into four: Group A is G7 member countries, B is  other big FDI sources in Europe, C is north and south Asia big economies, and D is ASEAN-6 countries. Then I traced a three-decades time series of FDI outward stock from 1992-2022. The results are interesting.

One, the top eight largest exporters of capital and their respective FDI outward stocks in 2022 are: US $8 trillion, Netherlands $3.2 trillion, China $2.9 trillion, UK $2.2 trillion, Hong Kong and Canada $2.0 trillion each, Japan and Germany $1.9 trillion each.

Two, from 1992 to 2022, the expansion in FDI outward stock were: Netherlands 27x, Canada 23x, US and UK 10x, Germany 6x. In Asia, China 312x, S. Korea 147x, HK 93x, Singapore 15x, Taiwan 13x, Japan 8x. The Philippines has low FDI outward stock (SMC, Jollibee, Unilab, etc) but high expansion of 149x.

Three, the largest sources of FDI in the Philippines are Singapore, Japan and US. Canada is not even in the top 20 with $19 million in net outflows from 2020-2022 (see Table 1). Perhaps this is one of the reasons why the economic team chose to go to Canada to meet investors there.

See some recent stories on trade and investments reported in BusinessWorld: “Europe roadshow yields P73B in ‘investment leads’” (July 10), “FDI net inflows decline 14% in April” (July 11), “PEZA approves P80.6-B investments in first half” (July 11), “$88-M investments from Marcos’ trips to materialize this year” (July 13), “Marcos signals more liberal economic measures” (July 14).

On the decline in FDI net inflows, the cumulative numbers for January-April are $3.561 billion in 2022 and $2.918 billion in 2023, or a change of minus $643 million. Big declines came from Net debt instruments: minus $504 million, and Net equity other than reinvestment of earnings: minus $119 million.

There was a net increase of $78-million FDI from Singapore, Japan and South Korea, but a net decrease of $89 million from Malaysia and $50 million from the US.

At the Philippine Economic Zone Authority (PEZA), investment values were P22.49 billion in January-June 2022 and P80.59 billion in January-June 2023, or an increase of P58 billion, huge.

I do not know how to reconcile the net decrease in FDI in the first four months and net increase in PEZA investments in the first six months; perhaps big investments came in May-June this year.

Next, international trade. Total trade in the first six months of the administration (July-December 2022) was $109 billion, exceeding the 2021 level and the same period in previous years. But in January-May 2023, total trade was only $80 billion, lower than the year-earlier level but higher than those of previous years.

We have a beautiful, firm statement by President Marcos Jr. for free trade in the report “Marcos signals more liberal economic measures.” He said, “No country ever got wealthy by following a protectionist policy… wealth of a nation is defined by the amount of trade that it has gone (through). We can look back many centuries and it has always been trade that has been the key to the wealth of any nation, of any system, of any economic system.”

Spot on, bright statement, Mr. President. High imports, high trade deficit are not necessarily bad if those imports — oil, machines, tractors, electronics, etc. — help improve overall productivity in the country. The merchandise trade deficit can be funded by non-merchandise trade surpluses, from BPO revenue, OFW remittances, or tourism revenues.

So in the first year of the Marcos Jr. administration, investment, especially in PEZA is up, exports especially in the second half of 2022 are up. He also reiterated his intention to stay the course of free trade. Good performance in year one in trade and investment by the administration.

Meanwhile, Secretary Diokno and Secretary Pangandaman are alumni of the Program in Development Economics (PDE) of the UP School of Economics and they will be the guest speakers in the PDE Alumni Homecoming on Aug. 19, Saturday at 4 p.m. at the School Auditorium. PDE graduates from various batches, from the late 60s to 2023, are encouraged to attend. No registration fee.