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CREATE law, opening of economy boost PH's net FDIs

By Joann Villanueva

July 12, 2021, 8:30 pm

MANILA – An economist has attributed the rise of foreign direct investments (FDIs) in the country in April 2021 to the implementation of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law and the opening of the economy. 
 
The Bangko Sentral ng Pilipinas (BSP) on Monday reported the 114.4-percent year-on-year jump of net FDI inflows to USD679 million last April from USD317 million in the same period last year.
 
In a report, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said lower interest rates and lower cost of some inputs like real estate property and leases are plus factors that enticed higher FDIs.
 
"Some foreign investors may have started to come in view of the progress made on the CREATE law, which was finally signed on March 26, 2021 and reduces corporate income tax rates to 25 percent for large corporations (from 30 percent) retroactive July 1, 2020, thereby narrowing the gap with the tax rates in other Asean/Asian countries, and also provides greater certainty on investment incentives, thereby helping attract more FDIs and making some foreign investors on the sidelines in recent months/years to become more decisive and finally bring in more FDIs into the country," he said.
 
Ricafort said positive credit rating actions on the Philippines, which even got its first-ever A-level credit rating, A-, from the Japan Credit Rating Agency (JCR) in June 2020, also boosted investors' sentiment on the domestic economy.
 
The positive credit rating actions, he said, "reflect improved international investor confidence in the country, manifesting the country's improved economic fundamentals, as well as the country's attractive demographics." 
 
These factors are, however, expected to be countered by the still high number of coronavirus disease 2019 (Covid-19) cases, aggravated by new variants that are reported to be more contagious.
 
Ricafort believes that higher government spending, especially on infrastructure, and the accommodative monetary policy by the Bangko Sentral ng Pilipinas (BSP) are seen to further support the rise in net FDIs.
 
"The improved economic and credit fundamentals of the Philippines in recent years amid attractive demographics, with the 12th largest population in the world at about 110 million, would make the Philippines a compelling investment destination and additional hedge for the global supply chain of various global/multinational companies looking for increased growth/sales, thereby making the country as an attractive production and marketing hub, as well as an attractive entry point to the other free trade agreement (FTA) partner countries of the Philippines," he added. (PNA)
 
 

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