Foreign direct investments (FDI) in 2012 rose to US$2 billion, higher by 9.8 percent than the previous year’s (revised) level of US$1.9 billion.1 The country continued to benefit from strong foreign investors’ confidence in the resilience of the domestic economy, given strong economic growth amid low and stable inflation, as well as a strong external payments dynamics. 2
By FDI component, net equity capital placements—which more than doubled to reach US$1.3 billion from US$558 million in the same period in 2011—accounted for the bulk of FDI for 2012. On a gross basis, equity capital placements summed up to US$1.6 billion, an increase of 60.1 percent from the year-ago level of US$1 billion. The bulk of these equity capital inflows came from the U.S., Australia, the Netherlands, Japan and the British Virgin Islands. Recipients of these equity investments were the manufacturing, real estate, wholesale and retail trade, and financial and insurance sectors.
Reinvested earnings likewise rose by 7.9 percent to reach US$1.1 billion in 2012 as foreign investors opted to retain a portion of their corporate earnings with their local enterprises.
Meanwhile, the other capital account—consisting largely of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines—reversed to a net outflow of US$373 million from a US$311 million net inflow in the same period a year ago. This developed on account of: 1) intercompany loan repayments of local firms to their foreign direct investors; and 2) extension of trade credits by local firms to their affiliates abroad.
In December 2012, FDI posted net inflows of US$20 million, a turnaround from the US$28 million net outflows posted in the comparable period in 2011. Gross placements of equity capital aggregated US$105 million during the month, higher by 11.7 percent compared to the US$94 million inflows posted in December 2011. The bulk of investments coming from the U.S., Japan and the Netherlands were channeled mainly to real estate; financial and insurance activities; electricity, gas, steam and air-conditioning supply; manufacturing, and wholesale and retail trade sectors. In addition, reinvested earnings for December 2012 amounted to US$85 million. However, the other capital account recorded a net outflow of US$158 million mainly due to intercompany loan repayments to foreign direct investors abroad.
1 The preliminary FDI level in 2011 was US$1.3 billion. Revisions were made to reflect : a) late reports; b) post-audit adjustments; and c) final/audited data from administrative records.
2 BSP statistics on FDI covers actual investment inflows, in contrast to investment data from other government sources which have different coverage. For instance, the BSP’s FDI data include 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) do 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 are presented in net terms (i.e., equity capital placements less withdrawals), while the IPAs’ FDI do not account for equity withdrawals.