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FDI Net Inflows Reach US$399 Million in November; January-November 2014 FDI Increase by 62 Percent

02.10.2015

Foreign direct investments (FDI) net inflows increased by 34.2 percent to US$399 million in November 2014 from US$297 million a year ago.1,2   This developed as net equity capital surged by more than 28 times to US$201 million from US$7 million recorded during the same period in 2013.  Specifically, the increase in net equity capital was buoyed by the 129.6 percent rise in equity capital placements coupled by the 83.6 percent decline in equity capital withdrawals.  The bulk of equity capital investments was channeled to the financial and insurance sector; manufacturing; real estate; transportation and storage; and wholesale and retail trade activities. 

Meanwhile, reinvestment of earnings and investments in debt instruments posted positive balances albeit lower than what were recorded during the same period a year ago.  Specifically, investments in debt instruments contracted by 37.1 percent while reinvestment of earnings declined by 9.4 percent.

On a year-to-date basis (January to November 2014), net inflows of foreign direct investments amounted to US$5.7 billion, increasing by 61.6 percent from its year-ago level of US$3.5 billion.  This reflected investors’ confidence in the Philippine economy on the back of sound macroeconomic fundamentals and strong growth prospects. 

All FDI components posted increases during the 11-month period.   In particular, the 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 resulted in the increase in investments in debt instruments by 46 percent to US$3.4 billion from US$2.3 billion.  Moreover, net equity capital investments surged by 114.8 percent to US$1.6 billion from US$723 million, mainly on account of the contraction in equity capital withdrawals (by 71 percent) which more than offset the 15.6 percent decline in equity capital placements.  Equity capital investments—which came mostly from the United States, Hong Kong, Singapore, Japan and Australia—were channeled mainly to the financial and insurance sector; manufacturing; real estate; wholesale and retail trade; and transportation and storage 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). 

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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