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FDI Net Inflows Surge by Fourfold to US$597 Million in April, Reach US$2.4 Billion in First Four Months of 2014

07.10.2014

Net inflows of foreign direct investments (FDI) surged to US$597 million in April 2014, four times higher than the US$149 million recorded in the same period last year.1,2   The significant rise in FDI in April was driven by the spike in investment inflows in debt instruments (or intercompany borrowings) to US$518 million from US$23 million a year ago.  In addition, reinvestment of earnings increased by 26.2 percent to US$80 million compared to US$63 million in the previous year. Meanwhile, equity capital placements yielded net outflows of US$1 million. This developed as withdrawals of US$79 million more than offset the US$78 million gross equity capital placements.  The bulk of these equity capital investments—which emanated largely from the United States, Japan, Singapore, the United Kingdom, and Germany—was channeled mainly to activities related to real estate; financial and insurance; accommodation and food service; and transportation and storage. 

On a cumulative basis, FDI net inflows reached US$2.4 billion for the first four months of 2014.  This was 9.1 percent higher than the US$2.2 billion net inflows during the same period last year as net inflows were recorded across FDI components. The sustained increase in net inflows continued to reflect strong investor confidence in the country’s solid macroeconomic fundamentals.  By FDI component, net investment inflows in debt instruments increased by 42 percent to US$1.6 billion in January-April 2014 from US$1.1 billion in the previous year.  Moreover, reinvestment of earnings rose by 1.3 percent year-on-year to US$265 million in January – April 2014. Meanwhile, net equity capital placements reached US$635 million as gross equity capital placements of US$954 million more than compensated for the withdrawals of US$320 million during the period.  Equity capital investments flowed in mostly from the United States, Hong Kong, Japan, Singapore, and Taiwan.  These were channeled mainly to financial and insurance; real estate; manufacturing; wholesale and retail trade; and mining and quarrying activities. 

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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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