The Philippines is looking to increase investment from the UAE and the wider Middle East as it implements a series of reforms and rolls out incentives to boost infrastructure development and its economy.
The Asian nation, which is expecting gross domestic product growth of 6 per cent to 7 per cent this year, following a 7.6 per cent expansion in 2022, has announced a slew of new projects, although it does expect a softening in foreign direct investment this year.
“We are actually expecting some moderation in the FDI, [to reach a] total of $9 billion this year compared to $9.2 billion in the previous year,” Francisco Dakila Jr., deputy governor of the Bangko Sentral ng Pilipinas, told media on the sidelines of an economic briefing in Dubai on Tuesday.
“But in 2024, we are expecting a rebound back to about $11 billion, which is also in line with the numbers that we were seeing before the pandemic. Key to these investments will be all the opportunities in the Philippines … there are a lot of key infrastructure projects that are in the pipeline, so these are all possible destinations of the investments with the emphasis on connecting all the different regions of the Philippines,” he said.
The reason for moderation this year is the “very challenging global environment”, he said.
“When the environment globally improves, then investors will be willing to take on more risks. So what the Philippines has to do is to be ready for this environment [and ensure] that the projects are there, the infrastructure is there, so that when the sentiment shifts to a so-called 'risk on attitude' then investments will flow once again to emerging market economies. What we want to be able to do is to become an attractive destination by then,” Mr Dakila said.
The Philippines is focusing on developing 197 flagship infrastructure projects worth approximately $155 billion across sectors including digital connectivity, health, power and energy, agriculture, water supply and irrigation, among others.
Among those, 39 will be undertaken on a public-private partnership basis, Benjamin Diokno, Secretary of Finance, said at the event.
“We estimate that around 55 per cent of projects will be funded through official development assistance, around 10 per cent through the national budget,” he said.
Under a new fiscal incentive system aimed at supporting important industries and projects, corporate taxation rates have also been reduced from 30 per cent.
Meanwhile, for projects where the investments are about $1 billion or they offer 10,000 jobs, 40-year incentives are available, subject to the President's approval, Mr Diokno said.
In July this year, the Philippines also established the Maharlika Investment Fund, the country's first sovereign wealth fund aimed at boosting economic growth.
The fund is expected to widen fiscal space, ease the burden on local funds and reduce reliance on official development assistance in funding big-ticket projects.
The fund is expected to be operational before the end of this year, Mr Diokno said.
“During this visit in Dubai, we've been in touch with a lot of the sovereign wealth funds and not just sovereign wealth funds, but even some of the other infrastructure funds and potential co-investors and looking into joint ventures,” Rosalia V De Leon, Treasurer of the Philippines, said on Tuesday.
“So we have also been able to [offer them a] list of our infrastructure flagship projects and how this would also complement their own priorities and at the same time also for the Maharlika Investment Fund, that it would not just be a debt financing, but more of equity funding, and that would also lessen the debt burden and reduce our exposure to refinancing eventually,” she said.
“And we'd like to have the sovereign wealth funds of … the Middle East to be able to provide more capitalisation to the Maharlika Investment Fund, because potentially the initial paid-up capital would be coming from our government financial institutions. Eventually we'll be seeing more private sector companies would also be partnering with us in growing this fund and also being able to support the requirements of our infrastructure flagship projects,” Ms De Leon added.
Progress on UAE Cepa deal
The two countries agreed to begin talks for the deal in February last year to enhance investment flows, remove unnecessary barriers to trade and create new business opportunities, officials said at the time.
In 2022, the UAE ranked as the 17th major trading partner for the Philippines.
“Yesterday, we met with [Dr Thani Al Zeyoudi, UAE Minister of State for Foreign Trade] and he reiterated the need to speed it up [the Cepa],” said Alfonso Ferdinand Ver, the Philippines' ambassador to the UAE.
“We were one of the first countries to be offered Cepa and … yesterday the UAE side said that they will give the draft template [and] if it's approved, that will facilitate everything.
“Personally … I'd like to have a nice signing occasion, maybe for Cop, but I said let's not wait for any occasion. As long as it's ready, please sign it. It's going to open up more opportunities, complementing all other efforts,” he said.
“And before that, we signed the investment protection and promotion agreements, it's all a chronological thing, then leading into more incentives and [making] the Philippines [more attractive] for investors,” he added.