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Net Foreign Direct Investments More than Doubled in September; First 9 Months Level Reaches US$4.9 Billion

12.10.2014

Foreign direct investments (FDI) posted net inflows amounting to US$680 million in September 2014, more than twice the year-ago level of US$314 million.  Increases were posted in all FDI components.1,2  The sustained increase in net inflows during the month reflects continued investor confidence in the country’s solid macroeconomic fundamentals.  In particular, net inflows of equity capital increased significantly to US$161 million from US$7 million last year.  This was due to the rise in equity capital placements by 252.4 percent to US$178 million, coupled with the decline in equity capital withdrawals by 59.8 percent to US$17 million.  The bulk of equity capital investments in September 2014—coming largely from the United States, Singapore, Taiwan, Japan, and Germany—was channeled to the manufacturing; real estate; wholesale and retail trade; financial and insurance; and transportation and storage sectors.  Moreover, investments in debt instruments issued by local affiliates, consisting of intercompany loans, grew by 73.8 percent to US$458 million from US$263 million in the previous year.  Reinvestment of earnings reached US$61 million, higher by 41 percent than the US$43 million recorded last year.

On a cumulative basis, net FDI inflows grew by 61.3 percent to US$4.9 billion for the first nine months of 2014 from US$3 billion during the comparative period in 2013.  The significant rise in FDI during the period was driven by the sustained growth in investments in debt instruments which rose by 54.5 percent to US$3.1 billion from US$2 billion.  This developed as a result of higher lending of parent companies abroad to their local affiliates to fund existing operations and business expansion plans in the country.  Net equity capital inflows also rose by 77.3 percent to US$1.1 billion as the decline in equity capital placements  by 27 percent (to US$1.6 billion from US$2.2 billion) was accompanied by a bigger reduction of 69.7 percent (to US$475 million from US$1.6 billion) in equity capital withdrawals.  Equity capital investments in January to September—which came mostly from the United States, Hong Kong, Japan, Singapore, and Taiwan—were channeled mainly to the financial and insurance; manufacturing; real estate; wholesale and retail trade; and transportation and storage sectors.  Meanwhile, reinvestment of earnings increased by 70.3 percent to US$650 million during the period from US$382 million. 

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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). 

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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