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Foreign Direct Investments Increase by 20 Percent to Reach US$3.9 Billion in 2013

03.10.2014

Net foreign direct investment (FDI) inflows in 2013 rose to US$3.9 billion from US$3.2 billion in 2012.1,2   The 20 percent increase in FDI during the year was buoyed by investors’ confidence on the country’s sound macroeconomic fundamentals. Net inflows were registered across all components of FDI.  In particular, non-residents’ net placements in debt instruments issued by local affiliates increased by more than sixfold to US$2.5 billion, accounting for more than half of the FDI in 2013.  This developed as parent companies abroad continued to lend to their local affiliates to fund existing operations and expansion of their businesses in the country. Moreover, gross placements of equity capital of US$2.5 billion more than offset withdrawals of US$1.8 billion.  As a result, net inflows of equity capital amounted to US$664 million during the period.  The bulk of gross equity capital placements—which originated primarily from Mexico, Japan, the United States, British Virgin Islands, and Singapore—were channeled mainly to manufacturing; water supply, sewerage, waste management and remediation; financial and insurance; real estate; and mining and quarrying. Meanwhile, reinvestment of earnings reached US$701 million in 2013.

On a monthly basis, net FDI inflows amounted to US$180 million in December 2013.  However, this was lower by 18.5 percent than the US$221 million recorded in the same period a year ago.  Equity capital investments during the month recorded a net outflow of US$60 million, a reversal of the US$210 million net equity capital inflows posted in the same month a year ago.  This came about as withdrawals of US$96 million offset the placements of  US$36 million.  Gross equity capital placements—sourced mostly from the United States, Singapore, Hong Kong, the United Kingdom and Singapore—were channeled mainly to real estate; mining and quarrying; financial and insurance; administrative and support service and manufacturing activities.  Meanwhile, non-residents’ net placements in debt instruments issued by local affiliates, consisting mainly of intercompany loans, rose significantly to reach US$182 million, reversing the US$51 million net repayments registered in the same period a year ago.  Reinvestment of earnings reached US$57 million in December 2013.

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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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