BOI sees sustained P1-T investment generation in 2021

Published December 11, 2020, 7:00 AM

by Bernie Cahiles-Magkilat

The Board of Investments (BOI) expects to sustain its P1 trillion investment generation level next year and growth in exports albeit at a slower pace.

 Trade and Industry Secretary Ramon M. Lopez, who is also chair of the BOI, said that despite the challenges of the pandemic, the government’s premier investment generating and promotion agency is still seeing significant inflows.

Trade and Industry Secretary Ramon M. Lopez (Bloomberg file photo)

“Investment approvals have already reached US$15B so far this year and we expect more than a P1 trillion or over $20 billion by 2021 with potentially over 34,000 jobs generated,” he said at the Manufacturing Summit.

The DTI chief’s investment generation projection for next year, however, could mean a flat or sustained growth from the BOI’s projected P1 trillion investment approvals this year, which could be second highest mark in the agency’s history.

For the first three quarters of 2020, BOI investment approvals already reached over $15 billion while the Philippine Economic Zone Authority (PEZA) has also registered a 43 percent increase in investments in the export-oriented IT-BPM industry.

Lopez also reiterated that there are 90 notable investment leads with high probability of completion, valued at $24.1B, generating 134,855 jobs. There are also 73 target investment leads that DTI will invite directly, coming from the US, Malaysia, Japan, China, Taiwan, and Europe.

In another address at the Health and the Economic Outlook for 2021, Lopez said that the exports sector will continue to grow albeit at slower pace.

“We are trimming down a bit our three-year export forecast slightly but still positive growth,” he said.

The Export Development Council is still reviewing if the country can maintain the lower part of the $122 billion-$133 billion by 2022.

“Our export performance, after dropping by half in April of this year, is already better than last year, at positive 2 percent growth rate by September, driven by increase in the export of copper and other mineral products, chemicals, and electronic products,” said Lopez.

From 50 percent decline mid of this year, Philippines exports improved to minus 35, minus 17, 10 , 9 and now positive 2 percent. Prior to the March lockdown, the country’s exports sector was still doing positive in January at 9.4 percent growth and February with 2.8 percent.  

Lopez cited electrical and electronics exports, which have been climbing up to a growth of 6.3 percent in September from a low of -44.9 percent in April.

Meantime, the projected investments are expected to boost the global supply chain for the country’s manufacturing sector, which has been showing signs of recovery.

The production indicators from January to November show that while there were significant declines during the first half of the year, there have been some recovery in the values and volumes of production indices.

“We can also observe that practically all the manufacturing sub-sectors are making up for the slowdown they experienced in the second quarter of the year. We are optimistic that this trend will continue in the coming months, as we continue to adapt to our new normal while observing public health guidelines,” he said.

The manufacturing sector has grown to be a major driver of the domestic economy, almost doubling its average growth rate to 5.8 percent in the 2013 to 2019 period, compared to around 3% in the previous decade. Manufacturing now accounts for almost 20 percent of Philippine GDP.

Unfortunately, due to the pandemic, manufacturing contracted by 11.4 percent in the first three quarters of 2020. But while the sector contracted by 12.3 percent in the first half of the year, this has softened to 9.7 percent in the 3rd quarter as we allowed the increased capacity of more businesses and more industries to reopen.

For instance, Lopez cited data on the auto industry, which indicated that auto production has started to pick-up. From hitting zero production in April, it has recorded more than 7,000 units in production as of September.

A survey conducted by IBM reveals that supply-chain resiliency is gaining importance, with 40 percent of business executives saying that they need to build capacity to respond to future crises and become more competitive in the long term.

 A DTI survey on the technology utilization of manufacturing enterprises in 2019, revealed that there remained low technology utilization in the manufacturing sector. Most are still making the transition from Industry 2.0 to 3.0.

Among the key findings were: 44 percent had no maintenance system; 35% collect and manage data through paper documents; 46% have no established cybersecurity; and more than 50% had no manufacturing equipment connected to a network.

However, the pandemic’s disruption of business and the use of digital tools have pushed the emergence of significant innovation among Philippine enterprises.

 A Microsoft-IDC study points out that 88% of business decision-makers in the country now say that innovation is a ‘must.’ Furthermore, while significantly more organizations in the Philippines found innovation to be hard (or 77%) before COVID-19, they have since changed perceptions with significantly less organizations (or 44%) having this sentiment at present.

The payoff from digitalization is expected to be significant. The 2020 Asia-Pacific Small and Medium Business Digital Maturity Study commissioned by Cisco Systems reveals the Philippines can increase its annual domestic output by at least $26 billion to $28 billion by 2024.

This can be achieved through the digitalization of our small and medium enterprises.

Currently, he said, SMEs are prioritizing customer experience, service delivery, and marketing and sales in their digitalization journey. They are mostly employing artificial intelligence, analytics, and cloud technologies for improving these business operations.