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Net Foreign Direct Investments in the First Half of 2008 Reach US$813 Million

09.10.2008

BSP Governor Amando M. Tetangco announced today that foreign equity capital in June 2008 posted a net inflow of US$132 million, significantly higher than the level recorded in the same month a year ago. This inflow arose largely from the infusion of foreign funds for the development of a large-scale tourism project, which involves the construction of leisure and entertainment facilities. Reinvested earnings also increased to US$39 million from the year-ago level of US$19 million. These were, however, moderated by the US$183 million net outflow in the other capital account as a result of intercompany loan repayments to foreign direct investors and trade credit extended to affiliates abroad. Thus, foreign direct investments (FDIs) in June this year registered a net outflow of US$12 million.

The developments in June brought the FDI in the first half of 2008 to a net inflow of US$813 million, with all components of FDI posting positive balances. The cumulative six-month level, however, was lower than the net inflow of US$1.9 billion recorded in the comparable period a year ago,  reflecting the prevailing cautious investor sentiment due to concerns about the negative effects of global financial market stresses on global demand.

Net inflows of FDI for the period January – June 2008 came largely in the form of equity capital amounting to US$487 million, according to Governor Tetangco. Gross equity capital placements for the first six months of the year aggregated US$669 million and were channeled mainly to manufacturing (shipbuilding and repair, auto electronics parts & components, paper products), services (recreational/cultural), mining, construction (hotel/leisure & resort/water spa development, power plant facility), real estate, and financial institutions. Investments came primarily from the U.S., Japan, Singapore, South Korea, Germany, and Malaysia.

Reinvested earnings during the first semester amounted to US$198 million, higher by 5.3 percent compared to the level posted in the same period in 2007 as foreign investors opted to plow back part of their earnings to local firms. 

Other capital, consisting mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines, posted a higher net inflow of US$128 million. The 11.3 percent increase over the US$115 million net inflow in the comparable period last year was due primarily to higher loan and trade credit availments by local subsidiaries from their parent companies. 

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