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Foreign Direct Investment Inflows Continue in August

11.10.2010

Foreign direct investment (FDI) net inflows in August 2010 amounted to US$80 million, eight times higher than the US$10 million net inflows posted in the same month a year ago.  Positive domestic economic developments, including robust second quarter GDP growth of 7.9 percent and reports of higher corporate earnings for the first half of 2010, helped to perk up investor sentiment, Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr. announced today. All FDI components posted net inflows during the month.    In particular, net inflows of equity capital amounted to US$66 million, representing a year-on-year increase of 187 percent, with equity capital infusion coming mostly from the U.S. and Japan.  The major recipients of these inflows were the real estate, mining, and information and communication sectors. Reinvested earnings and other capital investments also posted net inflows of US$5 million and US$9 million, respectively. 

As a result, net FDI inflows from January to August 2010 reached US$1.0 billion. This was, however, lower by 38.0 percent from the year-ago level as the decline in net equity capital inflows more than offset the growth in net inflows coming from reinvested earnings and other capital investments.  Gross equity capital placements for the eight-month period reached US$412 million, lower by 78.3 percent compared to the level posted a year ago.  Gross equity capital inflows in 2009 were significantly higher at US$1.9 billion due to big-ticket investments arising from the privatization of a local power corporation and the acquisition of a number of shares of a local beverage manufacturing firm.

Reinvested earnings surged to US$221 million in January-August 2010 from US$18 million in the same period a year ago, as investors opted to retain part of their earnings in local enterprises/corporations on the back of improvements seen in economic and corporate fundamentals.   Meanwhile, the balance of the other capital account (consisting mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines) reversed into positive territory, posting net inflows of US$599 million compared to the US$163 million net outflows registered in the same period in 2009.  Most of the inflows were attributed to higher trade credits extended to Philippine-based subsidiaries/affiliates by their parent companies abroad.

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