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Foreign Direct Investments Post Net Inflows in July; Year-to-Date Net Inflows Close to US$1 Billion

10.12.2010

Foreign direct investments (FDI) in July 2010 yielded net inflows of US$222 million, reflecting positive investor sentiment on the back of the country’s stronger growth momentum, expectations of manageable inflation for the rest of the year, and healthy external payments dynamics.  Positive balances were recorded across all the categories of FDI during the month in review.  Net inflows in July were largely driven by the other capital account, which summed up to US$186 million, or more than four times the level recorded in the same month a year ago. 

Year-to-date, FDI net inflows through July 2010 reached US$954 million.  The biggest contribution to the net inflows also came from the other capital account consisting largely of intercompany borrowings from foreign direct investors by their subsidiaries/affiliates in the Philippines.  Net inflows in the other capital account amounting to US$590 million were registered in January-July 2010, a turnaround from the US$147 net outflows posted in the comparable period last year.  This development was due mainly to higher intercompany loan availments by Philippine subsidiaries from their parent companies abroad, particularly in the manufacturing, services, financial intermediation, and electricity/gas/water supply sectors.  Reinvested earnings likewise registered a cumulative net inflow of US$223 million, markedly higher than the US$15 million posted in the same period a year ago.

 Meanwhile, net equity capital flows in the first seven months of the year amounted to US$141 million. This was 92.1 percent lower than the level posted in the comparable period in 2009 when direct investment inflows surged due to the acquisition of a significant number of shares in a local beverage manufacturing firm and the privatization of a local power corporation.  In particular, gross equity capital placements declined to  US$345 million in January-July 2010 from US$1.8 billion a year ago. The U.S., Ireland, the Netherlands, Switzerland, Japan, and Singapore were the major sources of equity capital flows.  These inflows were mostly channeled to the following sectors: banking, manufacturing (pharmaceutical products, semiconductors, health care products, and air conditioners/refrigerators), real estate, transport/storage, power generation, mining, and services (recreational/cultural).

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