Foreign direct investments (FDI) recorded net inflows of US$26 million in July 2011, stemming mainly from net inflows of equity capital and reinvested earnings. Compared to a year ago, however, FDI net inflows were lower by 88.3 percent. Renewed concerns on sovereign debt issues in Europe and a stalled recovery in the U.S. continued to weigh down on investor sentiment despite the Philippine economy’s continued favorable fundamentals.
Year-to-date, net FDI inflows through July 2011 reached US$805 million, lower by 9.7 percent than the US$891 million net inflows recorded in the comparable period last year. Gross equity capital placements for January - July 2011 declined to US$289 million from US$345 million a year ago. Investments originated mostly from the U.S., Japan, Hong Kong, Republic of Korea, and Singapore. These were channeled mainly to real estate, manufacturing, mining and quarrying, utilities, and wholesale and retail trade sectors.
Reinvested earnings during the first seven months amounted to US$248 million, higher by 7.8 percent compared to the level recorded in the same period in 2010 as foreign enterprises opted to retain their earnings in local corporations in light of the country’s improving business sentiment.
The other capital account—which consists largely of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines—also registered net inflows of US$321 million, largely on account of trade credits extended by affiliates abroad. This level represented a decline of 38.3 percent from the US$520 million net inflows posted in the previous year.