Net foreign direct investment (FDI) inflows rose by 5.3 percent to US$1 billion in January 2014, reversing the 7.9 percent decline recorded during the same period last year. This developed as investments in debt instruments and equity capital registered higher net inflows during the month despite the observed reversal in foreign portfolio investments. 1, 2 In particular, non-residents’ net placements in debt instruments issued by their local affiliates increased by 7.3 percent to US$687 million, accounting for about 67 percent of the FDI in January 2014. This was due to the continued lending of parent companies abroad to their local affiliates to fund existing operations and the expansion of their businesses in the country, an indication of sustained confidence in the country’s strong macroeconomic fundamentals.
In addition, net equity capital inflows likewise rose by 10.5 percent to US$278 million in January 2014 from US$252 million posted during the same period last year. In particular, gross placements of equity capital of US$361 million more than offset withdrawals of US$83 million recorded during the month. The bulk of gross equity capital placements—which originated mainly from Hong Kong, the United States, Japan, Singapore and the United Kingdom—were channeled mainly to financial and insurance; wholesale and retail trade; real estate; manufacturing and information and communication activities. Meanwhile, reinvestment of earnings reached US$62 million in January 2014.
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. On 21 March 2014, the BSP released the BPM6-based series from 2005-2013. 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.