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Foreign Direct Investments Yield Net Inflows in February 2010

05.12.2010

Foreign direct investments (FDI) in February 2010 recorded net inflows of US$209 million, 5.0 percent higher than the previous year’s level, as all FDI components posted positive balances.  The bulk of the inflows during the month emanated from the other capital account, which amounted to US$177 million, arising primarily from the repayment of trade credits extended earlier by Philippine subsidiaries/affiliates to parent companies abroad.  Equity capital and reinvested earnings also registered net inflows of US$25 million and US$7 million, respectively.

As a result, net FDI inflows in January - February reached US$310 million.  This was, however, lower by 47.6 percent compared to the year-ago level.  It will be recalled that in January 2009, there was a large inflow in equity capital due to the privatization of a local power corporation.       

The continued cumulative FDI net inflows during the period in review was brought about largely by the 26.9 percent rise in the other capital account balance to US$278 million due to the combined effects of net intercompany loan availments made by Philippine enterprises and repayment of trade credits by foreign direct investors to their local subsidiaries/affiliates.  Reinvested earnings meanwhile reversed to a net inflow of US$34 million, from the US$55 million net outflow a year ago.

By contrast, equity capital during the two-month period reversed to a net outflow of US$2 million, from US$428 million net inflows in the same period a year ago.  Despite sound macroeconomic fundamentals, gross equity capital placements remained subdued at US$50 million as investors adopted a wait-and-see stance prior to the political exercise in May.  Equity capital inflows were channeled to the manufacturing (semiconductor), utilities (power generation projects), financial intermediation, and real estate sectors, with investors coming mostly from the U.S., Switzerland, and Singapore.   

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