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Foreign Direct Investments Up by 1.6 Percent in July 2015; January-July Net Inflows Reach US$2.5 Billion

10.12.2015

Foreign direct investments (FDI) posted net inflows of US$458 million in July 2015, higher by 1.6 percent than the US$451 million registered in the comparable period last year.1, 2  Net equity capital investments increased by 45.3 percent to US$152 million on account of the US$173 million rise in placements which exceeded withdrawals of US$21 million.  The bulk of these equity capital placements came from Singapore, Hong Kong, the United States, Japan and the United Kingdom.  By economic activity, investments were mainly channeled to the financial and insurance, mining and quarrying, real estate, manufacturing, and wholesale and retail trade activities.  Financial and insurance activities captured almost half of the increase in total equity capital placements during the period reflecting investors’ confidence in the country’s sound financial system.  In addition, reinvestment of earnings increased by 31.7 percent to US$79 million.  Meanwhile, non-residents’ investments in debt instruments or intercompany borrowings, consisting mainly of loans extended by parent companies abroad to their local affiliates, were lower by 20.7 percent at US$227 million from US$286 million last year. 

For the period January-July, FDI net inflows amounted to US$2.5 billion.  This was 35.2 percent lower than the US$3.8 billion net inflows posted in the same period last year. 

Net equity capital placements increased marginally by 1 percent to US$805 million from US$797 million.  This was not enough, however, to offset the large declines in investments in debt instruments (by 51.6 percent) and reinvestment of earnings (by 12.7 percent).  Equity capital placements during the period, which amounted to US$1 billion, came mostly from the United States, Singapore, Hong Kong, Japan, and Germany.  These were channeled mainly to manufacturing, financial and insurance, real estate, electricity, gas, steam and air-conditioning supply and mining and quarrying activities. 

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1 Based on the Balance of Payments and International Investment Position Manual, 6th edition (BPM6) which uses the asset and liability principle in the compilation of FDI statistics.  Under the asset and liability principle, claims of non-resident direct investment enterprises from resident direct investors are 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 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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