THE Philippine Economic Zone Authority (PEZA) has inked an agreement with Sumitomo Mitsui Banking Corp. (SMBC) and Rizal Commercial Banking Corp. (RCBC) to bring in more Japanese investments in the country, especially in renewable energy (RE) and manufacturing.

"This memorandum of understanding (MoU) is targeted to spur economic development continuously positioning the country as an attractive investment destination characterized by agility and responsiveness to the needs and demands of our dynamic investors," PEZA Director General Tereso Panga said during the signing ceremony in Pasay City on Tuesday.

PEZA Director General Tereso Panga

The MoU indicates a target to increase Japanese investments in logistics, manufacturing and mineral processing, among others, within the country's economic zones (ecozones).

"They are into a lot of businesses. In PEZA alone, Japanese companies are into ecozone logistics, production of wiring harnesses, mineral processing, etc. And I think they are happy with their operations in PEZA," Panga said.

Eugene Acevedo, RCBC chief executive officer (CEO), said the agreement also targets to increase investments in RE and green initiatives.

"Definitely. In fact, the holding company of RCBC has had partnerships with Japanese companies focused on RE... We have been making sure that we work on transferring the technology learning as much as we can from our Japanese partners, especially because there's a long pipeline of RE projects in the Philippines," Acevedo said.

He added that they have a longstanding relationship with foreign companies, especially Japanese firms and that RCBC's role is to be the bridge between the Japanese market and the Philippines.

This was echoed by Yuichi Nichimura, managing executive officer and co-head of the SMBC Group in the Asia-Pacific Division, saying that the agreement is an expansion of the previous agreement with PEZA as there is an increasing interest from Japanese firms to invest in the country.

"Actually, we have had a bilateral MoU with PEZA since 2015. But now we upgraded to the triparty [MoU]... By making today's triparty MoU, I do expect further acceleration to attract the Japanese potential investors to the Philippines," Nichimura said.

Asked what sectors are attractive to Japanese investors, Nichimura answered: "Whatever the government initiatives.. for example, in the high technology area, pharmaceuticals, medical equipment, among others... [Also] nowadays batteries [for] electric vehicles. [Basically] any existing industries."

For his part, Panga said Japan remains the country's top ecozone investor with 807 PEZA-registered business enterprises.

"This has resulted in a substantial accumulation of investments, totaling P797.84 billion, $13.45 billion in exports, and the creation of 336,442 direct jobs as of October 2023," he said.

Challenges in the Philippines

Nichimura, meanwhile, cited challenges in investing in the Philippines, such as inflation and geopolitical tensions.

"So [like] inflation that is something that we cannot determine; so it depends on import of oil, gases, etc. So those are the factors that could potentially create a challenge not just in the Philippines," Nichimura said.

Inflation eased to 3.9 percent in December, sustaining a two-month downtrend. It was within the 3.6- to 4.4-percent range of the Bangko Sentral ng Pilipinas and the slowest rate since February 2022.

For Nichimura, if inflation continues to ease, he expects more Japanese investments to come into the Philippines and is committed to maintaining a positive relationship with the Philippines.

"Although the world is changing with rising geopolitical risk and uncertainty, I am confident that there is no change to the close relationship between the Philippines and Japan," he added.