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Market Intelligence | Philippines December 6, 2021

Foreign direct investment, Palawan, Tourism

This week, Colliers Research provides insights on Joint Foreign Chambers urging the government to open the economy further to foreign direct investments; Philippine manufacturing’s Purchasing Managers’ Index picking up in November; and Megaworld Corp. developing a boutique hotel and shopping district in its Paragua Coastown township in San Vicente, Palawan.

 

Foreign chambers tout FDI as key to economic recovery, poverty relief

SUMMARY

The Joint Foreign Chambers (JFC) has encouraged the Philippine government to open the economy further to foreign direct investment, which they believe is the key to economic recovery. The JFC is pushing for the passage of amendments of the following: the Foreign Investment Act, which will allow foreigners to own 100% of domestic enterprises except in areas where restrictions apply; the Public Service Act, which seeks to attract more foreign investments by declassifying telecommunications companies as public utilities, thereby removing the 40% cap on foreign ownership of telcos; and the Retail Trade Liberalization Act, which  seeks to lower the minimum capital investment by foreign retailers to PHP25 million from PHP125 million.

RESEARCH VIEW

In Q2 2021, the manufacturing, transport and storage, and real estate activities accounted for 13% of total foreign direct investment or PHP2.9 billion (USD58 million). Colliers believes that the continued inflow of foreign investments is likely to support recovery in office, residential, and industrial sectors post-pandemic. The recently enacted CREATE Law should help attract more investments into the country through reduced corporate income taxes. Other measures such as the Foreign Investments Act, Public Services Act, and the Retail Trade Liberalization Act should also be implemented to ensure that the Philippines remains an attractive investment destination of foreign businessmen.

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Factory output hits 8-month high in November

SUMMARY

Data from IHS Markit showed that the Philippine manufacturing’s Purchasing Managers’ Index (PMI) picked up by 51.7 in November from 51 in October, a 1% increase MOM and the country’s eight-month high. The headline index continued to register above the 50-neutral mark that separates expansion from contraction. This follows the downgrade to Alert Level 2 in Metro Manila and several provinces, which prompted higher demand. However, production volumes fell for the eighth consecutive month, although minimal, driven by material and staff shortages and delay in receiving inputs. Traffic issues, port congestion, and difficulties in sourcing materials also influenced sales performance during the month. The Philippines’ PMI ranks fourth among Southeast Asian countries, after Indonesia (53.9), Malaysia (52.3), and Vietnam (52.2).

RESEARCH VIEW

Data from the Philippine Statistics Authority showed that foreign direct investment (FDI) committed to fund manufacturing projects amounted to PHP2.27 billion (USD45 million) in Q2 2021, up 31% YOY. Colliers believes that bulk of these investments will likely be channeled onto the Cavite–Laguna–Batangas (CALABA) and Northern–Central Luzon industrial zones as they house a majority of the country’s industrial parks, which is a preferred location for several manufacturing firms. In our view, the industrial sector will thrive beyond 2021 as we see recovery in both local and global demand supported by the growth of domestic manufacturing, e-commerce, and ramped-up inoculation program across the country.

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Megaworld to build hotel, shopping district in Palawan

SUMMARY

Megaworld is developing a boutique hotel and shopping district in its Paragua Coastown township in Palawan. The Porto Hotel District will offer 450- to 1,199-square-meter boutique hotels, while the Mercato Shophouse District will offer 250- to 599-square-meter lots to be developed into shophouses. The districts have direct access to San Vicente town proper and the San Vicente Airport. The master-planned Paragua Coastown will also feature several mixed-use developments, medical and wellness facilities, a church, and other leisure and institutional amenities once completed.

RESEARCH VIEW

Based on our Q1 2021 Residential Survey, 43% of respondents chose Palawan as their preferred destination once the government lifts travel restrictions, closely followed by Boracay at 36%. Colliers believes that recovery in the leisure sector will likely be anchored by domestic tourism, with the Department of Tourism (DOT) expecting domestic trips to reach 84.8 million in 2022 or 90% of total trips in 2019. Colliers recommends that hotel operators strictly follow the health and safety protocols implemented by the government. In our opinion, the anti-pandemic programs laid out by the DOT, particularly the local tourism push, should also be highlighted  by hotel operators and other stakeholders to attract more guests and recapture demand once market sentiment improves.

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