Foreign direct investments (FDI) recorded a net inflow of US$43 million in December 2011 as equity capital and reinvested earnings posted positive balances, offsetting the net outflows in other capital. FDI inflows were sustained as the economy posted modest growth amid challenging global conditions brought about by the sovereign debt crisis in some parts of Europe and the generalized slowdown in global economic growth. Reinvested earnings increased by 56.3 percent from the year-ago level of US$16 million to reach US$25 million as foreign investors opted to retain earnings/profits in local enterprises. The other capital account during the month reversed to a net outflow of US$26 million from US$136 million net inflows in the same period a year ago due to intercompany loan repayments to foreign direct investors.
As a result, cumulative FDI for the whole year 2011 yielded net inflows of US$1.3 billion, sustaining the level in 2010. In particular, equity capital reversed to a net inflow amounting to US$513 million compared to the net outflow of US$396 million recorded for the entire 2010, due largely to the reacquisition of a sizeable amount of shares of stock by a foreign firm in a local telecommunications company. Equity capital infusion in 2011 came mainly from Japan, the U.S., Singapore, Republic of Korea and Hong Kong. The sectors that benefited from these inflows were the information and communication (telecommunications), real estate, manufacturing (semiconductors, power boilers/generators, motorcycles, and wiring harnesses/automotive components), mining and quarrying, and wholesale and retail trade.
Reinvested earnings in 2011 rose to US$365 million, twice the level recorded in 2010. This developed as foreign investors retained a larger amount of profits in domestic firms given the country’s favorable macroeconomic fundamentals and growth prospects.
Meanwhile, the other capital account—consisting largely of intercompany borrowing/lending between foreign direct investors and their subsidiaries/ affiliates in the Philippines—recorded net inflows amounting to US$384 million, almost one fourth of the US$1.5 billion posted in the previous year. The decline was due to lower net loan availments by local subsidiaries from their foreign/parent companies given adequate foreign exchange liquidity in the country.