How the numbers differ

RICHARD JAVAD Heydarian, a resident commentator of GMA Network, has repeatedly pointed out that China has fooled the Philippines into giving up the South China Sea in exchange for unrealized capital. In numerous articles published across popular venues, Heydarian draws his conclusions based upon the Philippine Statistical Authority’s (PSA) data, which only shows aggregated committed investments from Memorandum of Understanding with foreign investments, ones that are always canceled or modified later on.

Using data on possible investments leads to erroneous conclusions on the matter,  however, and more importantly, can be proven wrong when new results show. Indeed, the PSA’s newer data shows that Chinese FDI is projected to increase in 2019 and 2020, contradicting Heydarian’s claims. Specifically, the steel investment in Mindanao has been calculated at US$1 billion.

Some have meanwhile argued that Chinese FDI has increased, but these upticks have not been consistent. For instance, Ronald Mendoza and the Ateneo School of Government (ASoG) argue that Chinese investments still make up a meager share of overall FDI inflows despite the initial increase of Hong Kong’s FDI in 2016, which eventually reverted to normal levels afterward. 

Mendoza and his team relied on the Bangko Sentral ng Pilipinas dataset, which is the country’s most reliable source that draws from examining bank deposits and surveying investors. Nonetheless, a key problem for Mendoza and his team—including my previous works—is the reliance on aggregate national data to analyze Chinese FDI, which is unable to elaborate regional, sectoral, and temporal nuances.

This inability to get at fine-grained details inhibits us to get more important questions: what does the distribution of Chinese FDI look like across administrations; where does Chinese FDI go after it enters the Philippines; who works with Chinese investors; which sectors or what kind of firms receive Chinese investments?

Using the Securities and Exchange Commission’s firm-registration files, I created a dataset on the annual number of new firms with Chinese FDI. I mapped out the temporal, geographic, and sectoral details of Chinese FDI in the Philippines. These figures did not use the actual amount invested because my team and I are still working on forensically accounting the exact figures.

More importantly, using the amount of money disproportionally overrepresents certain investments. Larger investment amounts tend to fixate on the few firms that brought a significant amount of money in the country, which can be explained by significant business deals in certain sectors that do not often incur. In other words, using the monetary amount ignores the significance of the opening of new firms, which shows the growing business ties and interest of foreign investors. As such, I opted to use the annual number of new firms to indicate the increasing number of partnerships between Philippine businesses and Chinese investors.

Unlike PSA’s data, the SEC data track actualized investments because of the initial capital registration and bank deposit requirements. There is the share-commitments category, but shares paid so far indicate monetary payments. In other words, shareholders or their firm need to invest a portion of investment commitment in the banks and pay fees prior to registration. Unlike the BSP’s data, the SEC registrations can get at the fine-grained nuances of Chinese FDI, such as the timing of the registration, addresses or location, and sector. These details answer the temporal, geographic, and sectoral details of Chinese FDI in the Philippines. – Alvin A. Camba, PCIJ, May 2019