PH’s real trade and investment story
When in doubt, look at the numbers. It is easy to make pronouncements and press releases, but at the end of the day, what matters is the hard data to back these claims.
For example, during President Marcos’ state visit to China in January this year, much was made out of Chinese businessmen’s pledges to invest a total of $22.8 billion in the Philippines. This amount, they said, would be divided into $1.72 billion for agribusiness, $13.76 billion for renewable energy, and another $7.32 billion for strategic monitoring, which includes electric vehicles and mineral processing.Still, pledges are exactly that—promises to do something in the future. To make a pledge is one thing, but to deliver is another. We look forward to the day when such commitments materialize.
There is also a common notion that China is our top trading partner. This is partly—only partly—true.
China, indeed, is our top import market. According to full-year 2022 data from the Philippine Statistics Authority (PSA), our imports to China amounted to $28.2 billion, accounting for 20.6 percent of our total imports. Other top import sources were Indonesia (9.6 percent), Japan (9.0 percent), South Korea (9.0 percent), and the United States (6.5 percent).
When it comes to exports, however, China is only our third-largest export market. Last year, we exported goods in the amount of $10.97 billion to China, representing 13.9 percent of our total exports.
Our biggest export market was in fact the United States, with exports valued at $12.34 billion or 15.7 percent of the total, followed by Japan, with $11.13 billion or 14.1 percent of the total.
Trade is a two-way street, and it is more accurate to look at net trade instead of just absolute figures. Thus, if we look at the totality of exports and imports between the Philippines and China, the picture that would emerge is one of a trade deficit: We buy from China more than we sell to it. It is China that gains more from our bilateral trade.
The figures for January 2023 reflected a similar trend. China remained our largest import source, with goods valued at $2.32 billion, representing 21.1 percent of our total imports for the month.
On the other hand, Japan emerged as our top export market in January. It accounted for 16.6 percent of our total exports valued at $866.25 million. Other top export partners were the United States (14.1 percent of the total), China (12.7 percent), Hong Kong (10.1 percent), and Singapore (6.1 percent).
Official data on foreign direct investments also tell an interesting story.
According to the Bangko Sentral, the December 2022 net inflows of foreign direct investment (FDI) amounted to $634 million, representing a decrease of 76.2 percent year-on-year. The substantial drop is attributed to the base effect of significantly large net placements of equity capital in December 2021. The bulk of the December 2022 placements came from Singapore, Germany, and Japan—mostly directed to the manufacturing and real estate industries.
For the full year 2022, inflows amounted to $9.2 billion—a contraction of 23.2 percent from the $12 billion recorded in fiscal year 2021. The full year’s dismal numbers were attributed to the prolonged global slowdown and high inflation, which greatly affected the decisions of investors. For this period, investments came in from Japan, Singapore, and the US, and were channeled to manufacturing, real estate, and financial and insurance activities.
Moving forward, there are other approved investment commitments that have yet to materialize. According to the PSA, approved foreign investments for the fourth quarter of 2022 amounted to P173.61 billion—a 30.1 percent increase from the value of commitments in the same period in 2021. Of the total commitments, Singapore made 64.2 percent; Japan, 21.5 percent; and the United Kingdom, 5.9 percent.
We are confident that these commitments will become tangible investments, especially since the countries that made them are trusted and valued partners. Specifically, we acknowledge our top export partners—the United States, Japan, and Singapore—as big markets for Philippine-made goods. We should work doubly hard to encourage FDIs from these same countries. The effects would be mutually beneficial.
The benefits of trade and the entry of foreign investments, especially in productive sectors, cannot be overemphasized. These will invigorate our economy, provide much-needed infrastructure, create opportunities for a thriving labor market, and enable our people to generate higher incomes and improve their quality of life. The Marcos administration should focus its efforts on trade and investment partners that are true to their word, and that are willing to invest in priority industries that would power our growth and development.
Dindo Manhit is founder and CEO of the Stratbase Group.
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