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Many public-private partnership (PPP) projects face delays in approval because implementing agencies fail to complete the requirements, the National Economic and Development Authority (NEDA) said.

“The causes of delays are incomplete submissions of implementing agencies. It’s not NEDA. We are an easy recipient of the blame because we are the reviewers,” NEDA Secretary Arsenio M. Balisacan told the Senate Finance Committee on Wednesday.

This came after Senate Finance Committee Chair Mary Grace Natividad S. Poe-Llamanzares noted that the NEDA is often blamed for delays in PPP project implementation.

“Oftentimes there are many good PPP project proposals, but there’s a bottleneck in the NEDA. And some of them are pretty obvious like airport development, but the NEDA is pointed out for being slow,” she said in mixed English and Filipino.

The Philippine government is banking on PPP projects to implement its “Build Better More” infrastructure program, given the tight fiscal space.

However, Mr. Balisacan said implementing agencies should make sure they have completed staff work on PPP projects before submitting them to the NEDA.

“We cannot bring those projects to the NEDA Board, chaired by the President, with incomplete staff work. So, our appeal to the project proponents is to complete the proposal before you bring it in because it will only be delayed,” he said in mixed English and Filipino.

Mr. Balisacan said proponent agencies are required to submit a feasibility study for the project.

“If the feasibility study doesn’t provide the information that we are looking for, then there is no way we can advise the President whether this project is economically beneficial or not,” he said.

“Because at the end, at NEDA, what we are tasked to do is to assure the taxpayers that the projects that we approve will yield benefits that are greater than the cost.”

Under Republic Act No. 11966 or the PPP Code, PPP projects above the P15-billion threshold will still be submitted to the NEDA Board, while those below the threshold that do not require government subsidy will be sent to the implementing agency.

Projects that require government subsidy must be sent to the NEDA-Investment Coordination Committee (ICC), while local projects go under their respective councils.

All PPP proposals to the government must be approved within 120 days.

There are 164 PPP projects in the pipeline valued at PHP 3.2 trillion, latest data from the PPP Center showed. Of the total, 90 are solicited projects, while 74 are unsolicited.

Nigel Paul C. Villarete, senior adviser on PPP at the technical advisory group Libra Konsult, Inc., said that PPP projects are usually delayed due to rushed submissions and changes in leadership.

“Oftentimes, they (agencies) resort to shortcuts, resulting in missing documents, some of which are important and crucial, thus causing delays,” he said in a Viber message.

“PPPs usually are huge multi-year projects which cut across government’s six-year and three-year terms, oftentimes involving changes in project leaderships. More often than not, the new project managers are not familiar with the projects,” he added.

Mr. Villarete cited the need for a special interagency monitoring unit with long-term officials who could provide a “historical cross-administration” assessment of PPP projects.

Meanwhile, the Surallah-T’Boli-San Jose Road in South Cotabato was the latest project added to the list of completed infrastructure flagship projects (IFPs) since the beginning of the Marcos administration, Mr. Balisacan told the hearing.

The Flood Risk Improvement and Management Project for the Cagayan de Oro River was also completed this year, Mr. Balisacan said. Both completed in 2023 were the Samar Pacific Coastal Road Project and the Integrated Disaster Risk Reduction and Climate Change Adaptation Measures in Pampanga Bay Project. 

The government’s pipeline has 186 IFPs with a projected total cost of PHP 9.6 trillion. — Beatriz Marie D. Cruz

Philippine foreign direct investment (FDI) net inflows sank to an over four-year low in June amid lower placements across all instruments, the Bangko Sentral ng Pilipinas (BSP) reported on Tuesday.

The inflows fell by 29% to USD 394 million from USD 555 million a year ago, preliminary data from the BSP showed.

Month on month, net inflows dropped by 27.55% from USD 510 million in May.

June’s net inflow was the lowest level since the USD 314 million recorded in April 2020.

“The decline resulted from lower net inflows across all major FDI components,” the BSP said.

Nonresidents’ net investments in debt instruments declined by 30% year on year to USD 213 million in June from USD 304 million, central bank data showed. These consist mainly of intercompany borrowing or lending between foreign direct investors and their subsidiaries or affiliates in the Philippines.

Net investments in equity capital other than the reinvestment of earnings likewise went down by 33.2% to USD 74 million from USD 111 million a year ago.

Equity capital placements slid by 34.09% year on year to USD 87 million, while withdrawals dropped by 38.1% to USD 13 million.

Reinvestment of earnings also decreased by 23.4% to USD 107 million from USD 140 million a year ago, while investments in equity and investment fund shares dropped by 27.89% to USD 181 million.

By source, equity capital placements were mainly from Japan (47%), followed by the United States (15%), Sweden (14%) and Singapore (14%).

These were invested mainly in the manufacturing (48%), real estate (18%), wholesale and retail trade (16%) and financial and insurance (11%) sectors.

NET INFLOWS RISE IN FIRST HALF

Meanwhile, in the first semester, FDI net inflows increased by 7.9% to USD 4.4 billion from USD 4.1 billion a year earlier, BSP data showed.

Investments in equity and investment fund shares rose by 32.7% year on year to USD 1.71 billion in the January-to-June period.

Net foreign investments in equity capital surged by 62% to USD 1.197 billion in the six-month period. Placements went up by 57.9% to USD 1.158 billion and withdrawals rose by 41.5% to USD 261 million.

These placements mostly came from the United Kingdom (52%), followed by Japan (30%) and the United States (7%), and were mostly invested in the manufacturing (77%) and real estate (10%) industries.

Meanwhile, net investments in debt instruments went down by 3.4% to USD 2.725 billion in the first semester from USD 2.821 billion a year ago.

Reinvestment of earnings also dropped by 6.7% to USD 514 million.

FDI net inflows slumped in June due to elevated interest rates, as the market at that time was still uncertain about the start of the monetary easing cycles of both the BSP and US Federal Reserve, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Monetary Board on Aug. 15 reduced its policy rate by 25 basis points (bps) to 6.25%, its first easing move in nearly four years. Prior to the cut, the BSP kept its policy rate at an over 17-year high of 6.5% for six straight meetings following cumulative hikes worth 450 bps between May 2022 and October 2023 to rein in inflation.

BSP Governor Eli M. Remolona, Jr. has said they could cut rates by another 25 bps within the year. The Monetary Board’s last two policy-setting meetings this year are on Oct. 17 and Dec. 19.

Meanwhile, the Fed is widely expected to begin its easing cycle at its Sept. 17-18 policy meeting, with markets pricing in a 25-bp cut at the review and 100 bps in reductions for this year. The US central bank has kept the federal fund target rate at 5.25%-5.5% range following increases worth 525 bps from March 2022 to July 2023.

Still, FDI inflows grew year on year in the six months ending June as the Philippines posted robust economic growth last quarter compared with other countries in the region, Mr. Ricafort said.

Philippine gross domestic product (GDP) expanded by 6.3% in the second quarter, bringing first-half growth to 6% and meeting the low end of the government’s 6-7% target for the year.

At 6.3%, the Philippines’ GDP growth was the second-fastest in the April-to-June period, only behind Vietnam (6.9%). It was ahead of Malaysia (5.8%), Indonesia (5%) and China (4.7%).

“For the coming months, further cuts in BSP and Fed rates amid the easing inflation trend would further reduce borrowing costs that would help spur greater global investments, business, and other economic activities worldwide, which would thereby help boost FDIs,” Mr. Ricafort said.

“We expect [FDIs] to get better as we have seen so far this July-August, particularly, as BSP did a rate cut within the period mentioned,” Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a Viber message.

The central bank expects to end 2024 with USD 9.5 billion in FDI net inflows. In 2023, net inflows fell by 6.6% year on year to USD 8.9 billion. – Aaron Michael C. Sy, Reporter

The Philippines in July posted its widest trade deficit since March 2023 as imports grew at their fastest clip in three months, outpacing the uptick in exports, the Philippine Statistics Authority (PSA) reported on Tuesday.

Preliminary data from the PSA showed that the country’s trade-in-goods balance — the difference between exports and imports — stood at a USD 4.87-billion deficit in July, 18.05% bigger than the USD 4.12-billion gap a year ago.

Month on month, the July trade gap also widened by 12.73% from the USD 4.32-billion deficit in June.

The July trade deficit was the widest monthly gap since USD 5.02 billion in March 2023.

Meanwhile, for the first seven months, the Philippines’ trade deficit narrowed by 5.78% to USD 29.91 billion from USD 31.75 billion a year ago.

The country’s balance of trade in goods has been in the red for 110 straight months (nine years) or since the USD 64.95-million surplus in May 2015.

In July, the value of imports increased by 7.2% year on year to USD 11.12 billion from USD 10.37 billion, which was the fastest rise since April’s 13%. This was also the highest import value since the USD 11.63 billion recorded in March 2023.

Month on month, imports jumped by 12.4%.

For the first seven months, imports declined by 1.04% annually to USD 72.57 billion.

Lower commodity prices in the global market made imports more attractive to local buyers, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The seasonal increase in importation activities in the third quarter, a consistent pattern seen for many years, could lead to a further pickup in imports,” he said, adding that the peso’s recent appreciation versus the dollar would make imports cheaper and exports more expensive.

After trading at the P58 level against the dollar and hitting 18-month lows in May due to uncertainty over the timing of interest rate cuts here and abroad, the peso has since recovered, closing at the P56 level at end-August and even returning to the P55 mark earlier this month.

Meanwhile, July exports inched up by 0.1% to USD 6.249 billion from USD 6.246 billion a year ago, marking the first annual growth since April’s 27.9%. Month on month, exports went up by 12.24%.

Year to date, exports have risen by an annual 2.59% to USD 42.66 billion.

Exports are unlikely to post “significant gains” for the rest of the year, Union Bank of the Philippines, Inc., Chief Economist Ruben Carlo O. Asuncion said in a Viber message.

“The sober export outlook in the second half of 2024 is against a backdrop of lackluster China growth and risk of slower prospects for developed markets that already prompted key central banks, led by the European Central Bank, Bank of England and Bank of Canada, to start dismantling their high interest rate structures to prioritize growth moving forward, likely to be followed by the US Federal Reserve,” Mr. Asuncion said.

The Development Budget Coordination Committee expects 5% and 2% growth in exports and imports, respectively, this year.

IMPORTS

In July, imports of raw materials and intermediate goods picked up by 13.31% to USD 4.22 billion, accounting for 38% of total imports for the month.

Imported capital goods rose by 9.52% to USD 3.29 billion making up 29.6% of the total. Imports of consumer goods increased by 3.11% to USD 2.13 billion for a 19% share.

By value, imports of electronic products were the highest at USD 2.53 billion in July, up by 11.84% from last year. They accounted for 22.8% of total imports.

These were followed by mineral fuels, lubricants and related materials at USD 1.44 billion (12.9%) and transport equipment at USD 1.03 billion (9.2%)

China was the biggest source of imports in July with a value of USD 3.08 billion, making up 27.7% of the total import bill.

It was followed by Indonesia with imports valued at USD 947.55 million (8.5%), Japan with USD 893.54 million (8%), South Korea with USD 810.32 million (7.3%) and the United States with USD 675.58 million (6.1%).

EXPORTS

Meanwhile, among major types of goods, exports of manufactured goods went down by 3.1% year on year to USD 4.98 billion in July, but still made up the bulk or 79.6% of the total.

On the other hand, exports of mineral products rose by 11.4% to USD 583.6 million.

By commodity group, exports of electronic goods dropped by 11.9% to USD 3.25 billion from USD 3.69 billion a year ago. Still, electronic products were the country’s top export in terms of value, accounting for 52.1% of the total.

Among electronic products, semiconductor exports dropped by 22.63% to USD 2.37 billion.

Electronic goods remained the Philippines’ top export amid the positive outlook for artificial intelligence and technology sector, Mr. Asuncion said.

“We have yet to see how demand for electronics will recover in the next coming months. The tech sector in the region and in other advanced countries would still need to do better,” he added.

Overall, the United States remained the top destination for Philippine-made goods in July, with exports valued at USD 1.06 million, making up 16.9% of the total for the month.

Japan was the second-biggest market for Philippine exports with a value of USD 872.43 million (14% share), followed by China with USD 791.29 million (12.7%), Hong Kong with USD 744.82 million (11.9%) and South Korea with USD 305.17 million (4.9%).

Other top export destinations for the month were Taiwan, Germany, Thailand, and the Netherlands. – Beatriz Marie D. Cruz, Reporter

The Philippines’ one-year high unemployment rate in July highlights the economy’s inability to absorb workers into the labor force, which may result in the country missing out on the benefits of its demographic “sweet spot,” analysts said.

“The high unemployment rate especially among the new entrants shows the weakness of the economy in absorbing greater numbers of workers into the labor market,” Economics professor at the Ateneo de Manila University Leonardo A. Lanzona, Jr. told BusinessWorld in a Facebook Messenger chat.

“As the country is about to complete its demographic transition, more and more people will be in their working ages,” he added. “If the country is able to handle this phase well, it would reap demographic dividends. However, the country seems to be at a loss in generating the beneficial effects of this development.”

The country’s unemployment rate rose to a one-year high of 4.7% in July as fresh graduates entered the workforce, the Philippine Statistics Authority (PSA) said on Friday.

Preliminary data from the PSA’s Labor Force Survey (LFS) showed the jobless rate picked up from a two-decade low of 3.1% in June and was the highest since the 4.9% recorded a year ago.

This translated to 2.38 million unemployed Filipinos in July, up by 755,000 from 1.62 million in June. Year on year, this went up by 86,000 from 2.29 million in July 2023.

PSA Undersecretary and National Statistician Claire Dennis S. Mapa on Friday said these new graduates could not find jobs in the market, with youth unemployment, or Filipinos aged 15 to 24 in the workforce, reaching 1.02 million, contributing 43% to the jobless rate.

The demographic dividend refers to “the accelerated economic growth that can result from a rapid decline in a country’s fertility and the subsequent change in the population age structure,” according to the World Bank.

“Demographic dividend corresponds to a 20–30-year period in a country’s demographic transition when the proportion of working age population compared to the number of dependents increases rapidly,” it said.

In November 2023, National Economic and Development Authority Secretary Arsenio M. Balisacan said the “demographic sweet spot” could contribute at least a percentage point increase to the country’s growth potential or prospects for the next two to three decades.

This “window of opportunity” has started for the Philippines, he said, as its working-age population is now growing faster than the overall population.

“At this period, savings rise and growth is felt, hence demographic dividends are earned. If we reach this phase, but if people are out of work, we will lose these dividends,” Mr. Lanzona said.

“One has to remember that this phase in our demographic transition happens only once, and if we fail to take advantage of this, we will miss our chance to escape the lower middle-income trap that we have been in for the last 40 years,” he added.

Federation of Free Workers President Jose Sonny G. Matula told BusinessWorld in a Viber message that the rise of joblessness is concerning, especially for those new to the workforce as “it reflects the challenges our economy continues to face despite recovery efforts.”

“The increase in joblessness is a signal that more needs to be done to create sustainable and decent jobs,” Mr. Matula said. “Structural issues in our economy, such as mismatched skills, limited job opportunities in certain sectors, and ongoing inflationary pressures, are contributing factors.”

Rising joblessness shows the need for immediate relief measures and long-term reforms to address the root causes of unemployment, he added.

University of the Philippines Diliman School of Labor and Industrial Relations Assistant Professor Benjamin B. Velasco added that the country’s low labor force participation rate (LFPR) also shows that the government needs to do its part in providing more jobs for its working-age population.

The LFPR declined to 63.5% in July from 66% in June.

“With the private sector unable to provide quality jobs, the government has to step in, possibly through a jobs guarantee program, where it provides meaningful, quality jobs in sectors that the private sector does not find profitable. One is climate mitigation, like reforestation or river cleanup,” Mr. Velasco said in a Facebook Messenger chat.

JOB-SKILLS MISMATCH

For his part, Technical Education and Skills Development Authority (TESDA) Director-General Jose Francisco B. Benitez said addressing the education crisis is key to reaping the potential benefits of the country’s demographic transition,

“We should bridge them (workforce entrants) to a better pathway. The demographic dividend is real, but with the ongoing education crisis, it’s concerning. We really need to address it,” Mr. Benitez told BusinessWorld in mixed English and Filipino on the sidelines of an event on Tuesday.

“Compared to the Commission on Higher Education or even the Department of Education, TESDA has a faster response time because our courses are shorter. So, TESDA should also quickly provide the right kind of programs and assistance, particularly in empowering the youth,” he added.

TESDA is working to ensure that senior high school students who choose technical-vocation tracks have an apprenticeship pathway, Mr. Benitez said.

“If we can generate proper labor intelligence on a local level, then we can help those looking for a job or who might have a mismatch to have opportunities to gain the skills necessary to bridge that gap,” he added. “The kind of jobs required must come from the industry itself, including the specific skills they are seeking in order to provide employment to our fellow citizens.”

GREEN JOBS

Mr. Matula said he hopes the full implementation of the government’s Trabaho Para sa Bayan plan, which is a 10-year employment roadmap, and the Green Jobs Act would help boost job creation in the country.

“The landscape of green jobs in the Philippines is expanding, driven by national policies and international cooperation aimed at promoting sustainable development,” he said.

Mr. Matula cited a study by TESDA, which said the green job market is expected to generate about 5.10 million positions by next year, spanning sectors such as renewable energy, agriculture, waste management, and construction.

The Department of Labor and Employment (DoLE), he added, is actively conducting consultations and mapping projects to identify and promote green jobs in key sectors, such as energy, manufacturing, and tourism.

“DoLE needs to focus on programs that upskill and reskill workers to match the demands of growing industries, enhance labor market programs, and strengthen support for small and medium enterprises, which are the backbone of our job market,” Mr. Matula added. – Chloe Mari A. Hufana, Reporter