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FDI Net Inflows Rise in March 2014; Reaches Nearly US$1.9 Billion in Three Months

06.10.2014

Foreign direct investments (FDI) posted net inflows amounting to US$476 million in March 2014. 1,2 This was 78.5 percent higher than the US$266 million registered in the same period last year, as net inflows were recorded across components.  In particular, equity capital investments posted net inflows of US$278 million during the month.  This was on account of the 264.8 percent increment in gross equity capital placements to US$405 million from US$111 million in the previous year, which more than offset the withdrawals amounting to US$126 million during the period. Bulk of these equity capital investments—which emanated largely from the United States, Japan, Singapore, Hong Kong and Taiwan—were channeled mainly to financial and insurance activities; manufacturing; real estate; mining and quarrying; and wholesale and retail trade.

Moreover, intercompany borrowings (net placements of parent companies abroad in debt instruments issued by local affiliates) reached US$143 million in March 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.  Meanwhile, reinvestment of earnings rose by 3.5 percent year-on-year to US$54 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.

On a cumulative basis, FDI net inflows reached nearly US$1.9 billion for the period January-March 2014, albeit lower by 11.6 percent than the level recorded during the same period last year.  All FDI components registered net inflows.  In particular, direct investment in debt instruments yielded net inflows of US$1 billion.  Equity capital investment posted net inflows of US$636 million on account of the US$876 million gross equity capital placements which more than compensated for the withdrawals of US$241 million during the period.  Gross equity capital placements (sourced mainly from the United States, Hong Kong, Japan, Singapore, and Taiwan) were channeled to financial and insurance activities; real estate; manufacturing; wholesale and retail trade; and mining and quarrying activities.  In addition, reinvestment of earnings amounted to US$185 million during the 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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