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Foreign Direct Investment Inflows Continue to Surge in September; Nine-Month Level Reach US$3.1 Billion

12.10.2013

Net foreign direct investment (FDI) inflows surged by 141.4 percent in September 2013 to reach US$319 million from US$132 million posted in September last year.1,2   The significant rise in foreign investments into the country reflects favorable investor outlook on the Philippine economy on the back of sound macroeconomic fundamentals amid challenging global economic conditions. 

Net inflows of FDI were recorded across the three components, namely: a) equity capital, b) reinvestment of earnings, and c) placements in debt instruments.  In particular, non-residents’ net placements in debt instruments issued by local affiliates amounted to US$267 million compared to US$10 million a year ago.  Equity capital also yielded net inflows of US$7 million as gross placements of US$51 million more than offset withdrawals of US$43 million.  Gross equity capital placements—sourced mostly from the United States, the United Kingdom, Japan, the Netherlands and Hong Kong—were channeled mainly to financial and insurance; real estate; manufacturing; mining and quarrying; and professional, scientific and technical activities.  Reinvestment of earnings amounted to US$44 million, lower by 32.2 percent compared to US$65 million registered in the same period last year.

On a cumulative basis, net FDI inflows for the first nine months of 2013 grew by 33.3 percent to US$3.1 billion from US$2.3 billion posted in the same period last year.  By component, non-residents’ net placements in debt instruments during the period rose by more than six-fold to US$2 billion relative to the US$328 million level recorded during the comparable period in the previous year.  Parent companies abroad continued to lend to their local subsidiaries/affiliates to fund existing operations and/or the expansion of their businesses in the country.  The bulk of  equity placements—which originated mainly from Mexico, Japan, the United States, British Virgin Islands, and the United Kingdom—were channeled mainly to manufacturing; water supply, sewerage, waste management and remediation; financial and insurance; real estate; and arts, entertainment and recreation activities.  Meanwhile, reinvestment of earnings amounted to US$536 million, lower by 32.2 percent compared to US$788 million registered in the same period last year.

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1 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). 

2 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.

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