HSBC expects higher FDIs after elections 

Foreign direct investments (FDIs) to the Philippines could get a boost after national and local elections in May, as the policy directions of the new administration become clearer, analysts said in a report by BusinessWorld.

“Maybe FDI begins to pick up after the election… It’s been fairly subdued in terms of interest from foreigners, the way that I see it through the data,” Paul Mackel, Global Head for Foreign Exchange Research at the Hongkong and Shanghai Banking Corp. (HSBC) Global Banking and Markets, said at a virtual briefing on Monday.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed FDI inflows surged by 98.9% year on year to $855 million in October as the lockdown restrictions eased in the Philippine capital.

This brought the year-to-date total to $8.1 billion, up by 48.1% from the $5.5 billion in the same period of 2020. It already surpassed the $7.647 billion in net inflows seen in 2019, prior to the pandemic, as well as the central bank’s $8-billion full-year projection.

Investors usually adopt a wait-and-see approach from investors prior to the polls was a usual case in previous national elections in the Philippines.

Former BSP Deputy Governor Diwa C. Guinigundo said FDI will definitely be sensitive to the possible results of the upcoming elections, noting “it has been that way ever since.”

“Investors would like to get familiar with the candidates for the presidency and their respective platforms of government. They would also like to check the people around them because that would be material to the kind of leadership they could expect in the next six years,” Mr. Guinigundo said in a Viber message.

He noted foreign investors expect “market-friendly” policies from presidential candidates.

“These are business policies that enable FDIs to invest in more and more sectors of the economy with appropriate incentives in terms of good infrastructure, consistent public policies, and an efficient bureaucracy,” Mr. Guinigundo said.

“It’s a big turnoff for FDIs to deal with corruption and bad governance. Respect for property rights is fundamental.”

Asian Institute of Management economist John Paolo R. Rivera said investors will be waiting to see if the new administration can create a conducive environment for doing business.

“Not until they [candidates] discuss the specifics and operational aspects of their conceptual platforms, it would be too early to judge. But what is sure is the results of the upcoming elections will play a role in driving investor confidence,” Mr. Rivera said in a Viber message.

Foreign investors will also be keeping an eye on economic indicators like inflation trends, economic output, fiscal deficit, debt level, and dollar buffers, as well as election survey results, Mr. Guinigundo said.

Meanwhile, Andre de Silva, Head of Global Emerging Markets Rates Research at HSBC, said investment flows may also improve if the Philippines becomes part of key emerging market indices.

“There has been some discussion that there might be a prospect of index inclusion in some emerging market key indices for Serbia and others like the Philippines. If we had that, then that could add something, we are waiting if that would materialize, but nothing anytime soon,” Mr. De Silva said.

For this year, the BSP expects FDI inflows to reach $8.5 billion.