Central Bank of the Philippines : Foreign Direct Investments Post Higher Net Inflows in October 2013; Ten-Month Level Reaches US$3.4 Billion

Foreign Direct Investments Post Higher Net Inflows in October 2013; Ten-Month Level Reaches US$3.4 Billion

01.10.2014

Net foreign direct investment (FDI) inflows increased by 65.9 percent to reach US$254 million in October 2013 from US$153 million posted in the same period last year. 1,2   The notable rise in foreign investments into the country reflects favorable investor sentiment on the back of the country's macroeconomic stability amid challenging global economic conditions. 

More than half of the FDI during the period came from non-residents' net placements in debt instruments issued by local affiliates amounting to US$135 million.   Equity capital also helped boost FDI net inflows as gross placements of US$115 million more than offset withdrawals of US$47 million.  Gross equity capital placements-sourced mostly from the United States, Singapore, Switzerland, Hong Kong, and Taiwan-were channeled mainly to manufacturing; transportation and storage; financial and insurance; real estate; and mining and quarrying activities.  Meanwhile, reinvestment of earnings amounted to US$50 million, lower however by 44.2 percent compared to US$90 million in the same period last year.

On a cumulative basis, net FDI inflows for the first ten months of 2013 grew by 35.3 percent to US$3.4 billion from US$2.5 billion posted in the same period last year.  This is on account of the net inflows observed across the FDI components.  In particular, non-residents' net placements in debt instruments totaled US$2.1 billion during the period, more than sixfold the US$334 million level recorded during the comparable period in the previous year.  Parent companies abroad continued to lend to their local subsidiaries/affiliates to fund existing operations and/or expansion of their businesses in the country, encouraged by the sustained growth performance of the economy.  Moreover, net inflows of equity capital aggregating US$658 million also contributed to the increase in FDI during the period as gross placements of US$2.3 billion more than compensated for the withdrawals of US$1.6 billion.  The bulk of gross equity capital placements-which originated mainly from Mexico, Japan, the United States, British Virgin Islands, and Singapore-were channeled mainly to manufacturing; water supply, sewerage, waste management and remediation; financial and insurance; real estate; and arts, entertainment and recreation activities.  Meanwhile, reinvestment of earnings amounted to US$586 million, lower by 33.2 percent compared to US$878 million registered in the same period last year.

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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.  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.

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