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Foreign Direct Investments More than Double in January 2016

04.11.2016

Foreign direct investments (FDI) reached US$587 million in January 2016, more than double its year-ago level of US$263 million.1, 2 This developed as all FDI components recorded increases, signaling investor optimism in the growth potential of various local industries, as well as confidence in the country’s sound macroeconomic fundamentals.

In particular, net equity capital inflows rose ten times to US$257 million, contributing the largest to the FDI growth during the period. This was on account of the surge in equity capital placements almost fivefold to US$260 million, while withdrawals amounted to US$3 million only during the month.  Equity capital placements originated mainly from Hong Kong, the Bahamas, Taiwan, the United States and Singapore. The bulk of these equity capital placements were channeled to financial and insurance; real estate; electricity, gas, steam and airconditioning supply; manufacturing; and information and communication activities. In addition, net investments in debt instruments (or lending by parent companies abroad to their local affiliates to fund existing operations and business expansion) amounted to US$257 million. This is a
54.3 percent increase from its previous year’s level of US$167 million.  Meanwhile, reinvestment of earnings improved by 3.7 percent to US$73 million.

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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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