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Net Foreign Direct Investment Flows in the First Half of 2006 Reach Almost US$1.0 Billion

09.11.2006

Net foreign direct investments (FDIs) in June 2006 posted a net inflow of US$210 million, a reversal from a net outflow of US$23 million during the same period a year ago. This brought the year-to-date FDI flows to US$996 million. The rising net FDI flows mirrored the positive sentiment of investors on the country’s economic climate following the news on sustained GDP growth, increasing GIR, surplus fiscal position from April-June and easing inflation rate. 

Behind the more than two-fold expansion in net FDIs during the first half of the year was the reversal of the “other capital” account to a surplus of US$656 million from a net outflow of US$107 million in the same period in 2005. The other capital account is essentially comprised of intercompany borrowing/lending of funds between foreign direct investors and their local subsidiaries, branches or affiliates in the Philippines. These intercompany account transactions largely involved automotive and electronic firms. The improvement in the “other capital” account more than offset the net outflow of US$25 million in reinvested earnings in the first six months of the year.

Net equity capital remained in surplus at US$365 million from January to June 2006, albeit lower than the year-ago level, as equity investments rebounded in the second quarter after posting a contraction in the preceding quarter. Major investors during the six-month period were U.S., Japan, United Kingdom, Federal Republic of Germany, Switzerland and Taiwan. The bulk of the infused capital placements were directed to the manufacturing (chemicals, health-care, electronics, airconditioning system and steel products); services (medical research, resort facilities, information/technology, engineering, construction and facilities management); financial intermediation and real estate sectors.

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