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Net Inflows of Foreign Direct Investments Continue in July

10.10.2008

Net inflows of foreign direct investments (FDI) continued in July, amounting to US$147 million, Officer-in-Charge Nestor A. Espenilla, Jr. announced today.  Net inflows were due largely to higher gross equity capital placements, which rose by a hefty 92.6 percent to US$235 million as a result of investments for the rehabilitation of a hydropower facility in northern Luzon.  Reinvested earnings also rose year-on-year to US$81 million, almost six times higher than the year-ago level.  These inflows were, however, mitigated by the US$163 million net outflow in the other capital account arising from intercompany loan repayments to foreign direct investors and trade credit extended to affiliates abroad.                 

The continuing net inflows of equity capital and reinvested earnings shored up net FDI inflows during the seven-month period, which reached US$960 million.  This level was, however, less than half the level posted a year ago.  The ongoing financial crisis, particularly in the major advanced economies continued to weigh down on investor sentiment, OIC Espenilla added.  Gross equity capital placements amounted to US$904 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, hydropower facility rehabilitation), real estate, and financial institutions. Investments came primarily from the U.S., Japan, Singapore, South Korea, Germany, and Malaysia.

Reinvested earnings during the first seven months meanwhile rose to US$279 million, higher by 38.1 percent compared to the level recorded in the same period in 2007, as foreign investors opted to retain their earnings in local firms given the country’s underlying sound macroeconomic fundamentals. 

The other capital account, consisting mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines, reversed to a net outflow of US$35 million, due to intercompany loan repayments and higher trade credit extended to affiliates abroad.  The higher unremitted profits of the local branches of foreign banks, however, mitigated the impact of these outflows. 

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