PH bucks trend, FDI rose 29% in 2020 – UNCTAD

Foreign direct investments (FDI) in the Philippines rose by 29 percent to $6.4 billion 2020, bucking the overall hefty contraction in southeast Asian countries, according to the United Nations Conference on Trade and Development (UNCTAD).

In  its 38th Global Investment Trends Monitor, UNCTAD reported that FDI flows in the Philippines bucked the trend in the region which recorded a 31 percent contraction to $107 billion due to a decline in investment to the largest recipients in the subregion.

 For instance, the report said that inflows in Singapore fell by 37 percent to $58 billion as M&As contracted by 86 percent. Indonesia FDI flows declined by 24 percent to $18 billion, Vietnam by negative 10 percent to $14 billion and Malaysia by hefty decrease of 68 percent to $2.5 billion. In Thailand, FDI contracted by 50 percent to $1.5 billion, mainly due to a large divestment by Tesco.

Photographer: Paul Yeung/Bloomberg file

 Despite the hefty decreases in FDIs, UNCTAD said that the strength of South East Asia as an FDI engine remained evident.

The report noted that announced greenfield investment contracted more moderately at 14 percent, than in other developing regions. “South East Asia registered more than $70 billion in new greenfield investment projects, the largest volume among developing regions. Un uptick in the number of projects in the third quarter in Singapore could signal an impending FDI recovery in the region.

In addition, UNCTAD said the signing of the Regional Comprehensive Economic Partnership could help renew FDI growth.

Comparatively, FDI flows to developing economies decreased by 12 percent to an estimated $616 billion. Announced greenfield projects also declined by a hefty 46 percent, the number of cross-border project finance deals by negative 7 percent, and the value of cross border M&As sales by negative 4 percent.

FDI in developing Asia fell by 4 percent to an estimated P476 billion in 2020, the mildest FDI contraction among all regions. FDI in East Asia actually grew 12 percent to $283 billion due in part to a rebound of financial flows in Hong Kong, China at positive 40 percent after unrests resulted in exceptionally low values in 2019.

FDI flows to China rose by 4 percent to $163 billion, making the country the largest recipient in 2020. In South Korea, FDI fell by 42 percent to $6 billion.

Globally, UNCTAD said that FDI collapsed in 2020, falling by 42 percent to an estimated $859 billion from $1.5 trillion in 2019. FDI finished 2020 more than 30 percent below the trough after the global financial crisis in 2009 and back at a level last seen in the 1990s.

The decline was concentrated in developed countries, where FDI flows fell by 69 percent to an estimated $229 billion. Flows to Europe dried up completely to -4 billion, including large negative flows

in several countries. A sharp decrease was also recorded in the United States (-49%) to $134 billion.

The decline in developing economies was relatively measured at -12 percent to an estimated $616 billion. The share of developing economies in global FDI reached 72 percent, the highest share on record. China topped the ranking of the largest FDI recipients.

The fall in FDI flows across developing regions was uneven, with -37 percent in Latin America and the Caribbean, -18 percent in Africa and -4 percent in developing countries in Asia. East Asia was the largest host region, accounting for one-third of global FDI in 2020. FDI to transition economies declined by 77 percent to $13 billion.

FDI trend expected to remain weak in 2021, UNCTAD said.