Source: Malaya
THE government should focus on infrastructure building to capture a bigger share of foreign investment, Bank of the Philippines Islands president Aurelio Montinola III.
Speaking at the sidelines of last week’s Quarterly Economic Briefing, Montinola, also head of the Bankers Association of the Philippines, said the country should become more attractive especially now that uncertainty is gripping the developed economies.
“The developed world will have slow growth and divisive politics,” Montinola said.
Sadly, foreign investments have been growing slowly, he said.
Data from the Bangko Sentral ng Pilipinas showed that foreign direct investments (FDI) posted net inflows of $64 million in June this year.
Positive balances were recorded across all the major FDI categories during the month but net equity capital infusion amounted to $20 million, 66.7 percent lower than the level posted during the comparable period in 2010.
Montinola said the government’s public-private partnership (PPP) initiative could be a good vehicle for growth in investments, hence, it should be fast-tracked.
“(Investors) need concrete projects to invest in. We have been talking about PPP for about a year now,” Montinola said.
“The government should not only focus its resources on helping the poor through CCT, but also helping the middle class through better infrastructure,” he said.
He said consumption, the major driver of the country’s growth the past years, will likely go down with the expected leveling off of remittance inflows.
“At some point, the overall number (of the amount of remittances) will plateau,” he said.
He said the economy over the years depended largely on remittances, which support consumption. Consumption was strong partly due to a weak peso.
“Given this, economic growth should focus on the ‘G’ (government spending) and the ‘I’ (investments) because ‘C’ (consumption) will be affected by the peso’s appreciation and remittances reaching a plateau,” Montinola said.
Montinola earlier said lending is still likely to grow in double digits this year despite unfavorable external factors.
“I think, in simple terms, the banks want to lend but the business people have learned their lessons of ’97. They don’t want to overborrow; they will borrow (only) if there’s a good project,” Montinola said
He said in the best-case scenario, bank lending will grow between 10 percent and 12 percent this year.
“Well, again, you have to look at what happened in the second half of last year. Remember the first half of last year. It was a lead-up to the elections. And then people started lending after the elections in a bigger way. So the (percentage) increases in the first quarter and possibly even into the second quarter will not look good versus the base last year,” he added.
“But in the third quarter, we will see. That’s why we need the PPP, we need the other items so that there would be continuing lending growth,” he said.
He said PPP, however, will only have minimal impact this year on banks’ lending portfolio.
“The PPP will not affect this year because under the PPP rules, I’m told, the bidding process is six months, and then the winner has six months to start. Unless, which is also possible, unless the proponents need pre-operating financing. Still lending won’t be affected that much,” Montinola said.
He said that the real impact would be felt next year.
“That’s also good. Because what you need for the Philippines is every year you have some growth,” he said.
