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FDI Continue to Post Net Inflows in February 2014; Year-to-Date Level Reaches US$1.4 Billion

05.12.2014

Foreign direct investments (FDI) continued to register net inflows amounting to US$350 million in February 2014.1,2  However, this was lower by 59 percent relative to the level recorded in the same period last year.  Equity capital investments likewise posted net inflows of US$79 million during the month. This developed as gross equity capital placements of US$110 million exceeded withdrawals amounting to US$31 million in February 2014.  The bulk of these equity capital investments—which emanated largely from the United States, Japan, Singapore, Germany and Hong Kong—were channeled mainly to financial and insurance activities; real estate; transportation and storage; manufacturing; and mining and quarrying activities.

Moreover, reinvestment of earnings rose by 11.3 percent year-on-year to US$70 million during the month as foreign investors opted to retain their earnings in local corporations on the back of favorable prospects for the Philippine economy. Meanwhile, intercompany borrowings (or non-residents’ net placements in debt instruments issued by local affiliates) reached US$201 million in February 2014. This resulted from sustained lending by parent companies abroad to their local subsidiaries/affiliates to support existing operations and to fund the expansion of their businesses in the country.

On a cumulative basis, FDI likewise continued to record net inflows amounting to US$1.4 billion for the period January-February 2014, albeit lower by 24.7 percent than the level recorded during the same period last year.  By FDI component, equity capital investments yielded net inflows of US$357 million as gross equity capital placements of US$472 million more than offset withdrawals of US$114 million during the first two months of 2014. Gross equity capital placements during the period (sourced mainly from Hong Kong, the United States, Japan, Singapore and the United Kingdom) were channeled to financial and insurance activities; real estate; wholesale and retail trade; manufacturing; and transportation and storage activities.   Meanwhile, other components of FDI such as reinvestment of earnings and investment in debt instruments also registered net inflows amounting to US$131 million and US$888 million, respectively, during the January-February 2014 period.

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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.  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.

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