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Foreign Direct Investments Reach US$202 Million in April 2013

07.10.2013

Net inflows of foreign direct investments (FDI) amounted to US$202 million in April 2013, higher by 61.6 percent relative to its year-ago-level of US$125 million.1 ,2   By FDI component, gross equity capital placements rose to US$189 million during the month, more than sevenfold  the US$26 million registered in April 2012.   The bulk of these equity capital investments—which came mainly from the United States, the United Kingdom, Hong Kong, Singapore and a multilateral organization—were directed to financial and insurance activities, real estate activities, manufacturing, and mining and quarrying sectors.  These gross equity capital placements were partly offset, however, by the US$58 million withdrawal of investments, resulting in net equity capital inflows of US$131 million during the month.  The continued FDI inflows reflected the favorable investment climate on the back of the country’s sound macroeconomic fundamentals.

Reinvestment of earnings totaled US$64 million in April 2013 as foreign investors opted to retain their earnings locally on expectations of sustained strong corporate performance.  Non-residents’ net placements in debt instruments issued by local affiliates (or intercompany borrowings between foreign direct investors and their subsidiaries/affiliates in the Philippines) in the form of loans and debt securities amounted to US$7 million in April 2013, the same level recorded in April last year.  Parent companies abroad continued to lend funds to their local subsidiaries/affiliates to sustain existing operations or expand their businesses in the country. 

As a result of these developments, cumulative FDI for the first four months of 2013 totaled US$1.5 billion.  This was slightly lower, however, by 2.8 percent relative to the level recorded in the same period last year.  In particular, cumulative net inflows of equity capital declined to US$860 million from the US$950 million posted in the same period in 2012.  This came about as gross equity capital placements of US$1.7 billion (compared to US$1.0 billion in January-April 2012) were offset by equity withdrawals of US$857 million (compared to US$99 million a year ago).  Gross equity capital placements—sourced mostly from Mexico, Japan, the United States, Malaysia, and a multilateral organization—were channeled mainly to water supply, sewerage, waste management and remediation activities, manufacturing, financial and insurance activities, and arts, entertainment and recreation sectors.  Meanwhile, reinvestment of earnings summed up to US$260 million, lower by 29.9 percent than the year-ago level of US$371 million.  By contrast, non-residents’ placements in debt instruments issued by local affiliates reached US$385 million, markedly higher by 68.9 percent than the US$228 million registered in the comparable period a year ago. 

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1 BSP statistics on FDI covers actual investment inflows, which could be in the form of equity capital, reinvestment of earnings, and borrowings between affiliates.  In contrast to investment data from other government sources, the BSP’s FDI data include investments where ownership by the foreign enterprise is at least 10 percent. Meanwhile, FDI data of Investment Promotion Agencies (IPAs) do not make use of the 10 percent threshold and  include borrowings from foreign sources that are non-affiliates of the domestic company. Furthermore, 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.

The BSP adopted the Balance of Payments, 6th edition (BPM6) compilation framework  effective 22 March 2013 with the release of the full-year 2012 and revised 2011 BOP statistics.  The major change in FDI compilation is the adoption of the asset and liability principle, where claims of non-resident direct investment enterprises from resident direct investors are now presented as reverse investment under net incurrence of liabilities/non-residents’ investments in the Philippines (previously presented in the Balance of Payments Manual, 5th edition (BPM5) as negative entry under assets/residents’ investments abroad).  Conversely, claims of resident direct investment enterprises from foreign direct investors are now presented as reverse investment under net acquisition of financial assets/residents’ investments abroad (previously presented as negative entry under liabilities/non-residents’ investments in the Philippines). 

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