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Foreign Direct Investments Yield Net Inflows of US$364 Million in May; January-May 2016 Level Near US$4 Billion

08.10.2016

Foreign direct investments (FDI) posted net inflows of US$364 million in May 2016, albeit lower by 9.6 percent than the US$403 million registered for the same period last year 1, 2.  All FDI components recorded net inflows during the period.  In particular, debt instruments (consisting mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines) posted net inflows of US$220 million, higher by 15.4 percent from US$191 million for the same period last year. In addition, net equity capital also recorded net inflows of US$79 million as equity capital placements of US$86 million more than offset withdrawals of US$8 million.  The bulk of equity capital placements during the period came from Thailand, the United States, Hong Kong, Germany, and Singapore.  These capital infusions were channeled mainly to real estate; manufacturing; wholesale and retail trade; and electricity, gas, steam and airconditioning activities.  Meanwhile, reinvestment of earnings amounted to US$65 million during the month.

On a cumulative basis, FDI net inflows more than doubled to US$3.9 billion for the period January-May 2016 from US$1.6 billion last year.  This resulted as all FDI components registered increases in their net inflows. Specifically, debt instruments, which contributed largely to the increase in FDI during the period, grew by 143.7 percent to US$2.1 billion from US$878 million.  Net inflows of equity capital also increased by more than threefold to US$1.4 billion from US$440 million.  Investor sentiment was buoyed by the country’s sound macroeconomic fundamentals and its non-inflationary GDP growth (combination of low inflation and high growth), as well as positive growth prospects for the Philippine economy. Fresh equity capital infusions amounted to US$1.5 billion more than the withdrawals of US$125 million.  Equity capital placements during the period emanated largely from Japan, Hong Kong, Singapore, the United States, and Taiwan.  These were invested mainly to financial and insurance; real estate; manufacturing; construction; and accommodation and food service activities.  Reinvestment of earnings totaled US$321 million during the period.

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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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