IT’S not just our military brass that has been in serious disconnect with reality, believing that with the US and other allies’ help, we can quickly build up our naval resources to challenge China’s naval and coast guard might over the South China Sea disputes. (See my column, “Hilarious disconnect with reality,” Jan. 12, 2024.)
It seems the Department of Trade and Industry (DTI) is in a similar disconnect with reality, this time believing that under the current administration, there has been and will be a massive inflow of foreign investments into the country never before seen. So much so that by the end of Ferdinand Marcos Jr.’s term, we will be “the second biggest recipient of overseas capital in Southeast Asia, second only to Singapore.”
I cannot say if the DTI officials are just saying this for propaganda purposes, that they are so deluded because they think they have done spectacular investment promotion jobs, or they are just toadying to the President. They would seem to be so despondent over the slowdown in foreign investments that, as I report below, they are classifying projected remittances of our overseas workers as “foreign investments.”
The reality is, according to Bangko Sentral ng Pilipinas data, investment inflows into the country fell 23 percent in 2022 to $9 billion compared to 2021, and that for the period from January to October 2023, these fell 20 percent to just $7.9 billion, compared to the same period in 2022.
The BSP was quick to point out, though, that the decline was partly due to domestic factors such as the high inflation rates and to investors’ perception that the new administration still had not formulated a clear and aggressive program to take the Philippines on a high growth path that would lift it from its classification as a lower-middle-income economy, where it has been stuck since 1987, or for the past 36 years.
This decrease is also due to the global downturn in global foreign investments due to geopolitical tensions resulting from the wars in Ukraine and the Gaza Strip and the potential for military conflict if China decides to take over its rogue province Taiwan.
What is worrying, however, is that our trade and industry officials are in a serious reality denial that under Marcos, we are, or will become, the favorite of foreign capital in the region. And to what do they attribute this? They claim that Marcos’ foreign trips “as of December 21, have yielded $72 billion in consolidated, processed investments,” DTI Undersecretary Ceferino Rodolfo said early this month. Our ambassador to the US, Jose Romualdez, has also been telling the world repeating this propaganda line, although he gives a smaller figure of $5.7 billion in investments that have ostensibly been the result of his cousin’s trips.
Those claims, of course, are patently preposterous, and I’m astonished the DTI takes us for fools believing that yarn. Unless Marcos possesses the Jedi Mind Trick of “Star Wars” lore, foreign companies do not commit investments into even a country with the most promising economy after meeting that country’s head of state, no matter how impressive he or she might be.
What happens on these trips is that Marcos’ economic managers or tycoons close to the President simply ask their foreign business associate friends to agree to the usual optics of “memorandum of agreements” signing ceremonies, which actually mean nothing. It would be very informative if the DTI released copies of such memos. Only in the wishful delusion of DTI officials can such figures be claimed as foreign investment inflows to be expected.
Even the details of the DTI’s press release itself reveal what the purported $72 billion foreign investments really are. The DTI said that over a third ($27 billion) represents projects in the “planning stage” with no documentation at all, and another third, $29 billion, are investments where a memorandum of understanding or letter of intent has been signed.
These two amounts total $56 billion, and the DTI doesn’t explain what the remaining $16 billion foreign investments are. I would suspect some staff simply whispered to DTI official Rodolfo that this or that company was thinking of investing in the Philippines, and he quickly added it to his list.
One indication that makes the DTI’s glowing reports highly suspicious is that out of the purported $72 billion in investment commitments, it can’t even name one foreign firm promising to invest even $100 in the country.
Why? Because the companies could be nonexistent, or may just deny that they committed to such investments in the Philippines. The DTI should at least publicly release the list of, say, the top 20 foreign committed investments, and the amounts by each company, for it to acquire some credibility.
DTI official Rodolfo doesn’t even explain if these figures are the equity (capital) invested or even committed to be invested in the Philippines, or are the total project costs which the Board of Investments usually reports. The bigger part of project costs are loans, with equity typically accounting for only 20 percent.
The real figure is that out of the $72 billion worth of investments in projects that Marcos purportedly brought back from his foreign trips, only $205 million — less than 1 percent of the $72 billion — seems to represent equity capital. This is the figure that Trade Secretary Alfredo Pascual reported to the House of Representatives in August. That $205 million is still a small fraction of the claimed $72 billion.
Rodolfo may be credited for his optimism over foreign capital’s enthusiasm for the Philippines. But he is going overboard such that our government will be losing credibility in its claims. Who in the world believes that after hearing Marcos making a speech, a CEO orders his staff to invest in the Philippines and even forgets all the allegations of corruption during his father’s regime, which has even worsened after that strongman rule? Rodolfo and this administration’s communications office are taking us for fools.
In a talk with media last January 7, Rodolfo claimed that “for the first three quarters of 2023, the Philippines’ net foreign direct inflows amounted to $5.88 billion, higher than Malaysia’s $4.99 billion and Thailand’s $4.44 billion.” This statement is accurate insofar as the figures of the two Southeast Asian countries are concerned, as high-tech industries that have been going to Malaysia and Thailand in past years have been moving to China and India.
Rodolfo, however, sounded so ridiculous, or so obsequious toward Marcos when he claimed that “at the end of the President’s term, we would be the second biggest destination of FDIs in Southeast Asia.” That is a delusion, partly because the DTI official is ignorant of the size of foreign investment in our Asian neighbors.
Among the six top economies in Southeast Asia, we are the laggards, according to data from the United Nations Conference on Trade and Development (Unctad), so much of an outlier. Even if our FDI inflows are bigger than Malaysia and Thailand in the first three quarters of 2023, our FDI stock (as opposed to flows) of $119 billion at October 2023 is the smallest among the six countries in the region. It is pathetically half Malaysia’s $204 billion and less than a third of Thailand’s $310 billion. We’re far, far behind Thailand. In the past decade, we’ve even fallen behind war-ravaged Vietnam, which is ranked 65th in English literacy, compared to our 27th rank, only behind Singapore. Vietnam’s stock of foreign capital totals $226 billion, according to Unctad data, twice our $119 billion.
In the past three years, we have increased our FDI stock by $8.5 billion annually on average. That means increasing our $119 billion FDI stock to Thailand’s $310 billion (the second biggest FDI destination, according to Rodolfo ) would take 22 years — and that’s assuming Thailand’s FDI doesn’t grow at all in succeeding years. What is Rodolfo smoking?
The DTI’s fake news that is so absurd was its report that Marcos’ visit in October to Saudi Arabia resulted in “investment agreements worth $4.26 billion with Saudi businesses.” Most of this, though, or 87 percent, according to the Presidential Communications Office press release, was “a human resource services agreement worth $3.7 billion between Al-Jeer Human Resources Company-ARCO and Association of Philippine Licensed Agencies.” How in the world can a personnel recruitment company — and in what kind of business — invest $3.7 billion here?
The reality is that the Saudi company isn’t at all investing that astounding amount of $3.7 billion in the Philippines. It’s an estimate by one bureaucrat of the total amount of salaries for an undetermined number of years for overseas Filipino workers recruited by the Philippine agencies in the country and deployed by the Al-Jeer Human Resources Co.
Ridiculous: In DTI’s attempt to claim that there will be a massive inflow of foreign capital into the country, it is classifying OFW remittances as foreign investments. By that definition, we’ve been the biggest recipient of foreign investments in Asia for the past 30 years, $100 billion in just the past three years. Marcos doesn’t really need to tour the world to woo foreign investors.
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