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Net Inflows of Foreign Direct Investments Continue in First Ten Months of 2012

01.10.2013

Foreign direct investments (FDI) for the first ten months of 2012 recorded net inflows of   US$1.1 billion, higher by 32.6 percent than the US$853 million posted in the comparable period in 2011.   BSP statistics on FDI covers actual investment inflows.  On the other hand, investment data from other government sources have different coverage.1

Net inflows of equity capital—which increased by more than seven-fold to reach US$1.2 billion from US$170 million posted in the comparable period in the previous year—accounted for the bulk of FDI for the period January-October 2012.  The cumulative increase in FDI during the ten-month period reflected investors’ positive reaction to the country’s robust economic performance and the improved outlook following successive favorable credit rating actions by the Fitch Ratings, Standard & Poor’s (S&P) and Moody’s Investor Service in June, July and October 2012, respectively.  In particular, gross equity capital placements during the period aggregated US$1.5 billion, almost thrice the year-ago level of US$575 million.  The bulk of these equity inflows originated mostly from the U.S., Australia, the Netherlands, Japan and the British Virgin Islands and were primarily directed to the manufacturing, real estate, wholesale and retail, financial and insurance, mining, and transportation and storage sectors.

Reinvested earnings, amounting to US$136 million year-to-date, likewise provided support to FDI net inflows.  The level was lower, however, by more than half relative to the US$285 million reported in the same period a year ago.

Meanwhile, the other capital account—consisting mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines—reversed  to  a  net  outflow  of  US$252  million  from  a  net  inflow  of    US$398 million in the same period in 2011.  The turnaround in the other capital account was due largely to resident companies’ repayments of intercompany loans and extension of trade credits to their direct investors.

For the month of October 2012, FDI posted net inflows of US$38 million, 46.5 percent lower than the previous year’s level of US$71 million.  Gross placements of equity capital reached US$62 million during the month, almost thrice the year-ago level of US$22 million.  The bulk of investments coming from the US, Japan, and Switzerland were infused mainly to manufacturing, real estate, and financial and insurance sectors.  Similarly, reinvested earnings reached US$15 million during the month.  However, these were partly offset by net outflows recorded in the other capital account aggregating  US$24 million, a reversal of the US$43 million net inflows posted in October 2011.

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1  For instance, the BSP’s FDI data includes investments, where ownership by the foreign enterprise is at least 10 percent.   FDI could be in the form of equity capital, reinvested earnings, and borrowings between affiliates.  Meanwhile, FDI data of Investment Promotion Agencies (IPAs) does not make use of the 10 percent threshold. In addition, investments could include borrowings from foreign sources that are non-affiliates of the domestic company. Lastly, the BSP’s FDI data is presented in net terms (i.e., equity capital placements less withdrawals), while the IPAs’ FDI does not account for equity withdrawals.

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