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Foreign Direct Investment Inflows Continue in October; Ten-Month Level at US$729 Million

01.10.2012

Foreign direct investments (FDI) in October 2011 reversed to net inflows of US$58 million, in contrast to the US$32 million net outflows posted in the same month a year ago.  Positive balances were recorded across all the major FDI categories during the month in review. Reinvested earnings and net equity capital amounted to US$21 million and US$20 million, respectively, higher by 75 percent and 11.1 percent than the levels posted during the comparable period in 2010. The other capital account reached US$17 million, a turnaround from the US$62 million net outflows registered in the same period a year ago.
 
Given the developments in October, cumulative net FDI inflows for the ten-month period totaled US$729 million. This level was, however, lower by 24.7 percent than the US$968 million net inflows posted in the same period in 2010. Investment decisions were stalled by renewed concerns over the prevailing uncertainties in the global economic environment and greater risk aversion following intensified financial strains in the Euro Zone and the continuing weak U.S. economic performance. Notwithstanding these difficult external economic conditions, equity capital managed to post net inflows of US$93 million. In particular, gross equity capital placements for January-October 2011 improved to US$498 million from US$472 million a year ago.  The bulk of the investments came from the U.S., Japan, Republic of Korea, Hong Kong, Singapore and the Netherlands. These inflows were primarily infused to the following sectors: manufacturing (electrical/electronic circuits, wiring harness, garments/wearing apparel, iron and steel), real estate, mining and quarrying, electricity, gas steam and airconditioning supply, wholesale and retail trade, and financial and insurance activities.

Meanwhile, the reinvested earnings account during the review period increased by 37.5 percent to US$378 million as foreign direct investors opted to retain part of their earnings in local enterprises/corporations.
 
On the other hand, the other capital account—which consists largely of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines—registered net inflows of US$258 million, largely on account of trade credits extended by affiliates abroad. This level was, however, 47.3 percent lower than the US$490 million net inflows posted in the previous year.

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