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Foreign Direct Investment Net Inflows Continue in December; Full-Year Level at US$1.7 Billion

03.10.2011

Foreign direct investments (FDIs) grew strongly in December 2010 as net inflows registered US$441 million, more than double the US$172 million net inflows recorded in the same month a year ago.  The economy’s solid macroeconomic fundamentals and brighter growth potentials, together with the strengthening global economic recovery and improved risk appetite for emerging market assets, continued to drive investments into the country.  The growth in FDI was achieved following the rise in equity capital net inflows to US$371 million from only US$2 million in December 2009 due primarily to the sizeable foreign investments in the hotel, entertainment, and transport service industries. This more than offset the decline in net inflows of reinvested earnings (by 50.0 percent) and other capital (by 60.3 percent), which settled at US$12 million and US$58 million, respectively.

As a result, full-year FDI net inflows in 2010 reached US$1.7 billion.  This was, however, lower by 12.7 percent compared to US$2.0 billion realized in 2009.  Equity capital investments in new and existing projects moderated during the year as investor sentiment was generally marked by cautiousness amid uncertainties surrounding the sovereign debt crisis in some parts of Europe, geopolitical tensions in Korea, asset price bubble and overheating concerns in fast growing emerging markets.  Net inflows of equity capital investments amounted to US$848 million, more than 50 percent lower than the net inflows posted in 2009 when large-scale investments were recorded arising from the privatization of a local power corporation and the acquisition of shares of a local beverage manufacturing firm.  Equity capital infusion for the 12-month period came mainly from the U.S., Japan, Hong Kong, Macau, Singapore, Ireland and Kuwait.  The sectors that benefited from these inflows were mining and quarrying, hotel services, real estate, transport and storage, banking, and manufacturing (pharmaceuticals, health products, semiconductors, and air conditioners/refrigerators and parts). 

Reinvested earnings during the year meanwhile rose to US$291 million, higher by almost 90 percent than the level recorded in the same period in 2009.  This developed as foreign investors in local firms retained a larger amount of profits given the favorable domestic economic prospects.
 
The other capital account, consisting mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines, registered net inflows amounting to US$574 million, more than seven times the level last year, due largely to higher intercompany loan availments.

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