Reinvestment needed to boost RP’s economy: Salceda

August 23, 2010 11:20 am 

LEGAZPI CITY, Aug. 23 — More capital investments are needed to fuel up the country’s economic growth, a top economic analyst said Monday.

Albay Gov. Joey Sarte Salceda urged the Aquino administration to draw up a national policy that would persuade local and foreign businesses here to reinvest in order to stimulate the country’s economic climate.

“The national policy should be: firms must invest!, whether here or abroad but preferably here,” he stressed.

Citing economic ratings of the Securities and Exchange Commission (SEC) Top 1000 companies, Salceda said these companies have accumulated profits of P3 trillion plus non-cash of P1 trillion dividends over the past 10 years but only reinvested P1.1 trillion.

If local firms invest at home, it would have similar effect on the peso since investments in the Philippines require massive importation of capital equipment and raw material and therefore would use up foreign exchange, he said.

With investment rate at only 14 percent of Gross Domestic Product (GDP), way below its neighbors and the required rate of 23 percent to grow eight to 10 percent GDP, there are enough domestic opportunities in modernization of existing inventory of infrastructure and industrial plant and equipment and in the expansion of capacities in tourism, transportation, housing, IT and IT-enable services, Salceda explained.

The first wave of investments under the Aquino watch is likely to focus on items that reduce costs of doing business or enhance ease of doing business.

He claims that the government is targeting 18 percent investment rate in 2011 basically from private domestic sector given fiscal constraints capping public infrastructure.

To meet this investment goal, it would require a total private investment of P940 billion while the import content would at least account for 50 percent of investment costs, Salceda said.

He said this policy once carried out would expect the government to reduce its own foreign borrowing program so its capital outlay of four percent of GDP and its import content would likely draw down on the regular forex flows.(PNA)

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