MANILA, November 3, 2003  (STAR) By Des Ferriols - The Bangko Sentral ng Pilipinas (BSP) is expecting foreign direct investments to reach $900 million in 2004.

BSP managing director for economic research Diwa Guinigundo said the conduct of the coming presidential elections would be critical in assuring investors that the Philippines is still a good destination for investments.

"Once the uncertainty is removed after the elections, foreign direct investments would start to come in earnest," Guinigundo said.

"Itís really just the uncertainty that creates the hesitation. When people are not sure how things would turn out, they would wait and see first," he added.

The BSP said foreign direct investments are expected to go to the countryís most attractive sectors, namely: power, information technology, electronics and telecommunications.

Guinigundo said the power sector is still the biggest draw for foreign direct investments as generation companies expand their current capacities in anticipation of an increase in economic activity.

Likewise, Guinigundo said IT and electronics are growth areas that would continue to attract investors since the country has comparative advantages over its primary competitors in the region.

Telecommunications, on the other hand, is expected to sustain its surge as the consumer market expands further with the rise in income from the deployment of more overseas Filipino workers abroad.

"We would have seen the beginning of this surge in foreign direct investments this year had it not been for all this political noise that we are generating," Guinigundo said. "But once that subsides, we expect to see improvements."

Portfolio investments, Guinigundo said, are also expected to grow next year as expectations improve in anticipation of the recovery after the elections.

"Considering the disruptions we saw this year, we still saw an increase in portfolio investments compared to last year," he said. "We will see even more activity once all this is over."

The BSP reported that despite the market shocks created by the US-Iraq war, the SARS epidemic and the build-up of political controversies towards the May elections, portfolio investments still went up by over 120 percent to $423.5 million during the first nine months of the year from $186.2 million over the same period in 2002.

The BSPís optimism, however, comes in the midst of warnings of capital flight as the BSP reported that the countryís January to July capital and financial accounts dropped to a $2.083 deficit, overshooting the full-year projection of a $1.973 deficit.

Reported by: Sol Jose Vanzi

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