(File photo)

MANILA – Foreign direct investments (FDIs) to the Philippines are expected to increase following the passage in the Senate of a measure to liberalize several sectors including the telecommunication industry.

In a commentary issued on Wednesday, Fitch Solutions said the measure is seen to improve investors’ appetite for the Philippines.

“The country has a highly conducive environment for technological uptake but is held back by nascent digital infrastructure. Increased foreign investment in the telecoms and tech sectors will serve the growth of such assets, particularly terrestrial fiber networks where coverage is particularly limited,” it said.

To date, foreign ownership in public utilities in the country is only allowed up to 40 percent.

The commentary noted that “downside risks to foreign investment and improvements to fixed networks include the Philippines' proximity to escalating tensions between China and Taiwan, as well as the appeal of mobile broadband.”

It said the government has been enticing foreign investors through continued liberalization of FDI policies.

Citing Bangko Sentral ng Pilipinas (BSP) data, it said FDIs have slipped for the third consecutive year in 2020, by nearly 25 percent.

With favorable demographics for having a large number of young population, the report said: “the Philippines is largely held back by underdeveloped digital infrastructure.”

“Liberalising the environment for foreign investors is likely to encourage greater investment into maturing the country’s digital infrastructure, a requirement for tech-players looking to successfully capitalize on the Philippines’ conducive demographics,” it said.

Allowing greater foreign investors’ participation in the domestic telco industry is seen to boost the country’s capacity to be among the fastest-growing cloud market in the region over the medium to around USD1.36 billion market size by 2024.

The commentary said that “despite the rapid increase in investment, the Philippines will remain one of APAC’s smallest cloud computing markets, with recent activity insufficient to significantly improve the country’s scarce terrestrial digital infrastructure.’

“That said, liberalizing the market should see an influx of international tech-players looking to monetize the Philippines’ long-term growth opportunity and we could see the country’s cloud computing market forecasts revised upwards,” it added. (PNA)