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Foreign Direct Investments Reach US$936 Million in First Two Months of 2016

05.10.2016

Foreign direct investments (FDI) grew by 50.6 percent to US$936 million in the first two months of the year from US$622 million last year. 1,2  All FDI components registered increases as investors’ confidence was buoyed by the country’s economic growth prospects and sound macroeconomic fundamentals.  Equity capital investments contributed largely to FDI net inflows during the period, rising by 119.1 percent to US$449 million from US$205 million last year. This was due to the increase in equity capital placements by 92.2 percent to US$471 million that emanated largely from Hong Kong, Spain, Bahamas, Taiwan and Japan.  These inflows were channeled mainly to agriculture, forestry, and fishing; financial and insurance activities; construction; manufacturing; and real estate activities.  Partly offsetting these placements were withdrawals of US$22 million.  Net investments in debt instruments (or intercompany borrowings from foreign direct investors by their subsidiaries/affiliates in the Philippines) registered an increase of 23 percent to US$355 million.  Meanwhile, reinvestment of earnings reached US$132 million during the two-month period. 

On a monthly basis, net FDI inflows amounted to US$349 million in February 2016.  However, this was slightly lower by 2.9 percent than the US$359 million recorded in the same period a year ago.  In particular, investments in debt instruments recorded lower net inflows of US$98 million from US$122 million in the same month a year ago.  Meanwhile, equity capital investments expanded by 6.9 percent to US$192 million as equity capital placements reached US$211 million while withdrawals only amounted to US$19 million during the month. Gross equity capital placements were sourced mostly from Spain, Japan, Hong Kong, the United States, and Germany.  By economic activity, equity capital infusions were mainly channeled to construction; manufacturing; real estate; accommodation and food service; and electricity, gas, steam and airconditioning supply activities.  Reinvestment of earnings grew by 2.6 percent to US$59 million during the month.

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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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