FDI Net Inflows Surge by 103 Percent in October; Reach US$5.3B in the First 10 Months of 2014

Net inflows of foreign direct investments totaled US$444 million in October 2014, increasing by 102.7 percent from its year-ago level of US$219 million as all FDI components registered increases.1,2 The marked increase in FDI net inflows during the month was largely attributable to the surge in net equity capital placements to US$213 million from US$73 million in the previous year. This developed as equity capital placements rose by 80.9 percent to US$217 million from US$120 million, while equity capital withdrawals declined by 91.5 percent to US$4 million from US$47 million. Equity capital investments during the period—which came mostly from the United States, Germany, Singapore, the United Kingdom and Japan—were channeled mainly to the financial and insurance; manufacturing; real estate; wholesale and retail trade; and administrative and support service sectors. In addition, net placements of foreign direct investors in debt instruments issued by local affiliates expanded by 74 percent to US$168 million from US$96 million. Reinvestment of earnings during the period increased by 28.1 percent to US$63 million.

As a result of these developments, cumulative FDI net inflows for the period January to October 2014 amounted to US$5.3 billion, higher by 64.1 percent than the US$3.2 billion level posted a year ago. The increase in FDI net inflows during the period was buoyed by favorable investor outlook on the Philippine economy on the back of sound macroeconomic fundamentals. Specifically, net placements in debt instruments expanded by 55.4 percent to US$3.3 billion from US$2.1 billion, accounting for about 61 percent of total FDI net inflows during the 10-month period. This came about as parent companies abroad continued to lend to their local subsidiaries/affiliates to fund existing operations and/or the expansion of their businesses in the country. Moreover, net inflows of equity capital grew by 88.9 percent to US$1.4 billion from US$716 million. The bulk of equity capital investments for the first ten months of 2014—coming largely from the United States, Hong Kong, Japan, Singapore and Taiwan—was channeled to the financial and insurance; manufacturing; real estate; wholesale and retail trade; and transportation and storage sectors. Meanwhile, reinvestment of earnings increased by 65.4 percent to US$713 million from US$431 million in the comparable period a year ago.

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1 The BSP adopted the Balance of Payments, 6th edition (BPM6) compilation framework effective 22 March 2013 with the release of the full-year 2012 and revised 2011 BOP statistics. On 21 March 2014, the BSP released the BPM6-based series from 2005-2013. The major change in FDI compilation is the adoption of the asset and liability principle, where claims of non-resident direct investment enterprises from resident direct investors are now presented as reverse investment under net incurrence of liabilities/non-residents’ investments in the Philippines (previously presented in the Balance of Payments Manual, 5th edition (BPM5) as negative entry under assets/residents’ investments abroad). Conversely, claims of resident direct investment enterprises from foreign direct investors are now presented as reverse investment under net acquisition of financial assets/residents’ investments abroad (previously presented as negative entry under liabilities/non-residents’ investments in the Philippines).

2 BSP statistics on FDI covers actual investment inflows, which could be in the form of equity capital, reinvestment of earnings, and borrowings between affiliates. In contrast to investment data from other government sources, the BSP’s FDI data include investments where ownership by the foreign enterprise is at least 10 percent. Meanwhile, FDI data of Investment Promotion Agencies (IPAs) do not make use of the 10 percent threshold and include borrowings from foreign sources that are non-affiliates of the domestic company. Furthermore, the BSP’s FDI data are presented in net terms

(i.e., equity capital placements less withdrawals), while the IPAs’ FDI do not account for equity withdrawals.

Source: www.bsp.gov.ph